The plan had been floated by Ali Jehangir Siddiqui, then special assistant to the prime minister, according to officials of the Ministry of Finance and relevant documents. The move was at the advanced stage and the government wanted to promulgate a presidential ordinance to make the wealth fund operational, they added.
However, the Ministry of Finance and State Bank of Pakistan (SBP) refused to give their consent for a highly risky and politically controversial proposal, said the officials, as reported by The Express Tribune.
The finance ministry also opposed the proposal to seek the federal cabinet’s approval of a draft bill of the sovereign fund through circulation of a summary among cabinet ministers.
Siddiqui, with the help of the Ministry of Law and Justice, had prepared the Sovereign Wealth Fund of Pakistan Bill, according to the proposed draft available with The Express Tribune. It was a tailor-made bill prepared by the law ministry.
The disclosure of the sovereign fund proposal has come at a time when the PTI government has also announced to set up a wealth fund that will manage 200 public-sector enterprises.
Although details about the PTI’s wealth fund are not available, the party’s financial wizard Asad Umar has said that the main purpose is to free these entities from the influence of line ministries to improve their governance.
Umar also said seed money would not be required to create the fund and its financing needs would be met by the finance ministry.
The central bank also opposed the proposal of setting up the fund by taking a foreign loan, said a senior official of the central bank.
He said the SBP’s argument was that the central bank could not support such ventures, particularly at a time when it did not have reserves to provide sufficient cover to imports.
“There was a plan to set up the sovereign wealth fund, but it was never discussed at my level,” confirmed former finance minister Dr Miftah Ismail. He said the plan remained at the level of ministry officials.
Officials of the Ministry of Finance said the last government wanted to start the fund with an initial investment of $200 million. The proposal was to take a Chinese commercial loan of $5 billion on the back of sovereign guarantees given by the government of Pakistan, they said.
The basic idea was that the government would arrange $5 billion and hand it over to a fund managed by people from the private sector, said another finance ministry official. The Ministry of Finance never agreed to the risky proposition, he added.
“I would have never agreed to such a proposal where $5 billion was to be borrowed to make an investment in speculative activities,” said Ismail.
He said sometimes people try to do things without having expertise, for instance, the interim foreign minister made a false claim that the PML-N government spent Rs200 billion on its last day in office.
The caretaker foreign minister also claimed that “when they opened the books, the treasury was empty”. Ismail said such comments showed rudimentary understanding of how government finances work.
The draft of the proposed wealth fund showed that the objective was “to receive, manage and invest money in a diverse portfolio of medium and long-term strategic investments to generate income for Pakistan, to add value to public assets and bring them to the economy”.
Sources said the Ministry of Finance had serious objections to the areas of investments which included capital market, domestic and foreign equity securities, debt securities, derivatives, commodities, immovable property, project development and participation in all kinds of money markets. It had also been proposed to give vast powers to the fund’s board to make decisions on investments in any sector in and outside Pakistan. There was also a proposal to set up sub-offices of the sovereign fund abroad.
Finance ministry officials said the last government wanted to transfer the real estate owned by the Capital Development Authority and Pakistan Railways to the sovereign fund and then it would be sold. PML-N bigwigs also wanted to invest in global real estate markets by using the fund.
Their plan also included the transfer of LNG power plants to the sovereign fund.
Another serious issue was the sale of assets of any type by the wealth fund. The board had been proposed to be given complete discretion for the investment of surplus funds.
The federal government could give directions to the board only in the case of financial emergency. Beyond that “the board shall not be subject to the direction or control of any other person or authority,” according to the draft bill.
The basic idea was to borrow seed money from the federal government, take supplementary contributions from the government as well as from public-sector enterprises. The bill also entailed taking grants and loans from international organisations.