ISLAMABAD: As the government is actively pursuing its policies of economic reforms, it is expecting up to Rs 250 billion merely from selling stakes in banks and petroleum companies in the first phase of selling government’s shares in companies.
In an interview to the Wall Street Journal, Finance Minister Ishaq Dar said around $1.9 billion would be generated through these sales via capital markets - some for hard currency as global depository receipts listed on foreign exchanges.
“We will have this process on the fast track,” he said and first on the block would be government stakes in petroleum companies and in lenders such as Habib Bank Ltd -0.62%, Allied Bank Ltd -0.11% and United Bank Ltd +0.15%.
These asset sales could bolster the Karachi Stock Exchange, which-while soaring in recent months-still isn’t taken seriously by many global investors because of its low volume of transactions and the resulting susceptibility to speculators. According to the Wall Street Journal, Pakistan’s government expects to sell several stakes in companies this spring in moves aimed at dispelling concerns about the pace of economic reforms.
The government also hopes to reap as much as $5 billion from auctioning off third- and fourth-generation mobile-phone licenses. Another plan is to split the loss-making flagship carrier, Pakistan International Airlines Corp +0.37%, into two companies ahead of selling a stake, he said. Nawaz Sharif, who came to power in June, inherited a troubled economy, plagued by an energy crisis and a deteriorating security situation. Since then, the government has taken steps to cut subsidies and eliminate debt in the electricity sector, reducing the blackouts. It also negotiated a $6.6 billion deal with the International Monetary Fund to stave off default.
The report said the economy has since shown signs of reviving, though growth is barely keeping up with the country’s birthrate. The IMF this month acknowledged a tentative turnaround, especially in the large-scale manufacturing and services sectors. It raised its forecast for economic growth in the fiscal year ending June 30 to 3.1% from its previous estimate of 2.8%. The government is more optimistic, expecting growth of some 4.4%. “I am quite happy and satisfied that things are moving the way they should be. We are right on track,” Ishaq Dar said. “We are pursuing and taking the most difficult decisions, a few of which are politically unpopular. But to fix the economy, those stabilizing measures as well as structural reforms were necessary.” Soon after taking office, Nawaz Sharif’s government pledged to sell stakes in 31 state-owned companies, a move that could help boost the country’s depleted foreign-exchange reserves. Many of those companies, however, are still in the process of selecting new
“The investors don’t see anything happening of a dynamic, vibrant nature. If they see a few privatization transactions successfully completed, they will bring in their money and invest. They are waiting for privatization to take place before they go for greenfield projects,” said Ishrat Hussain, the director of the Institute of Business Administration in Karachi and a former governor of State Bank of Pakistan.
The sales of government stakes “will encourage more participants,” said Jahangir Siddiqui, chairman of JS Bank Ltd -2.30% and one of Pakistan’s leading businessmen.
“Today, only a small float is available. If you need to have true price discovery, you need to have a float available. Otherwise it won’t be possible for serious players to come to the market.”
The government is also planning to restructure Pakistan International Airlines, which flies routes around the world, including to North America. PIA has already put out a tender to lease new aircraft, to improve its capacity and save fuel with more-efficient planes.
As part of the restructuring, PIA is likely to be split into two companies. A holding group would retain some Rs 250 billion in debt and excess personnel, and a “new” PIA would hold the lucrative landing rights and new aircraft. Afterward, the government plans to sell a 26% stake in that new PIA to a strategic partner, Dar said.
“This will have more attraction to potential investors: they will enter into a clean transaction and not be evaluating and calculating the legacy and the bad negative numbers of a poor balance sheet,” the finance minister said.
The government is planning to raise money this fiscal year through the long-delayed sale of 3G and 4G mobile spectrum.
The government has yet to decide whether to auction off just 3G, or 3G and 4G spectrum together, Dar said.
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