Govt faces scrutiny over $8 billion Pakistan Sovereign Wealth Fund

The government is grappling with mounting pressure to clarify the purpose and future of the Pakistan Sovereign Wealth Fund (PSWF), a fund valued at over $8 billion, which has faced criticism for its unclear objectives and non-operational status. 

The PSWF was established with the intent to manage the country’s leading blue-chip public sector entities, drawing inspiration from similar models in Saudi Arabia, Qatar, and the UAE. 

However, nearly a year after its creation, the fund has yet to fully operationalise, leading to significant concerns from both domestic lawmakers and international lenders.

During a session of the National Assembly’s Standing Committee on Finance and Revenue, chaired by PPP’s Syed Naveed Qamar, NA members voiced serious concerns over the confusion surrounding the PSWF. 

The committee highlighted the absence of a clear strategy for the fund and questioned the rationale behind its establishment, especially when existing laws governing state-owned enterprises (SOEs) and privatisation processes are already in place.

The PSWF Act of 2023 transferred the management of several key public sector entities to the fund, including the Oil & Gas Development Company Ltd (OGDCL), Government Holdings Pvt Ltd (GHPL), Pakistan Petroleum Limited (PPL), National Bank of Pakistan (NBP), Mari Petroleum Co Ltd (MPCL), Pakistan Development Fund Ltd (PDFL), and Neelum-Jhelum Hydropower Ltd (NJHPL). However, the transition has disrupted the accountability and reporting structures of these entities, leaving them in a state of operational limbo.

The committee’s concerns were further amplified by the recent statements from the IMF and World Bank, which have both called for the abolition of the PSWF. These international lenders have cited a lack of transparency and questioned the fund’s effectiveness in managing public assets, adding to the pressure on the government to either reform or dissolve the fund.

Minister of State for Finance Ali Pervez Malik acknowledged the challenges posed by the PSWF, admitting that the law enacted by the previous government left several critical issues unresolved. 

He informed the committee that the government is in the process of hiring an international consultant to provide expert advice on how to proceed with the fund. The consultant is expected to be appointed by the end of August, but the final recommendations and any potential restructuring of the fund may not be realized until December 2024.

Special Secretary for Finance Nasheeta Mohsin added that the government was aware of the concerns raised and was working on a plan to either operationalise the fund or revert the entities to their previous governance structures. She emphasised that the government intends to maintain the status quo for these entities until a clear decision is made, ensuring that their operations are not further disrupted.

The committee also expressed frustration over the lack of communication from the entities now under the PSWF, noting that they have ceased reporting through their established channels. To address this, the Minister of State committed to issuing clear written instructions to reestablish normal reporting lines and operations for these companies.

In a related development, the Finance Division has initiated the process of hiring an international consultancy firm to assist in the operationalization of the Pakistan Sovereign Wealth Fund (PSWF). 

The division issued a request for proposal (RFP) on its website, seeking expert advice for the establishment of the fund under the Pakistan Sovereign Wealth Fund Act, 2023.

This move is part of a special programme approved by the federal government and the Special Investment Facilitation Council (SIFC) to engage top-tier consulting firms. A total of 18 international firms, including industry leaders like Accenture, Bain & Company, and McKinsey & Company, have been shortlisted for the assignment.

The selected firm will guide the Finance Division in developing the institutional framework necessary for the PSWF, which is expected to manage key public sector entities and align with global standards. The tender notice for the RFP has been published following the government-approved framework for consulting assignments.