IMF tightens conditions on Pakistan Sovereign Wealth Fund, bars asset sales, borrowing

The International Monetary Fund (IMF) has imposed strict conditions on Pakistan’s Sovereign Wealth Fund (SWF), requiring legal amendments that will limit its powers, restrict financial activities, and delay its operational launch until parliamentary approval is secured, The Express Tribune reported. 

Under commitments given by Pakistan, the SWF will not be made operational until amendments to its governing law are passed by parliament. These changes are part of the programme conditions linked to ongoing IMF reviews and financing.

The revised framework will significantly alter the fund’s structure, reducing it to a holding company responsible for managing state-owned enterprises (SOEs) rather than directly executing asset sales or raising financing.

The original law, enacted in 2023, allowed the SWF to transfer shares of major state entities and sell them to foreign investors. These included Oil and Gas Development Company, Pakistan Petroleum Limited, Mari Petroleum, National Bank of Pakistan, Pakistan Development Fund, Government Holdings (Private) Limited, and Neelum-Jhelum Hydropower Company. The IMF raised concerns over governance, transparency, and the authority to sell state assets without a competitive process.

Under the revised approach, the SWF will no longer be allowed to directly sell assets to local or foreign buyers. Any privatisation or disposal of SOE assets will be subject to open, competitive and transparent procedures, with disclosure requirements at each stage, including beneficial ownership.

The IMF has also required a complete prohibition on key financial activities. The SWF will not be allowed to incur debt, provide guarantees or collateral, lend to public or private entities, participate in public-private partnership projects, acquire financial assets, or receive funding from financial institutions, the central bank or SOEs.

In addition, all revenues generated by the SWF will be transferred directly to the federal government. The fund will not retain any proceeds for investment purposes, and any capital allocation will be made through the federal budget under the Public Finance Management Act 2019.

Officials said these restrictions are intended to ensure fiscal safeguards and prevent off-budget liabilities. The amendments will be incorporated into law as a structural benchmark following the approval of the FY2026-27 budget.

The governance framework of the SWF is also being revised. Appointments to the board and advisory bodies will be made through transparent and merit-based processes, with safeguards to ensure independence and accountability. The accountability provisions under the SOE Act will apply to the fund and its managed entities.

Pakistan has also assured the IMF that exemptions granted under the current law will be withdrawn to align the SWF with international standards.

Separately, the government has submitted amendments to SOE laws to parliament to bring them in line with the SOE Act and is working on dedicated legislation for remaining entities by August 2026. Reviews of state-owned enterprises are ongoing, with ten entities assessed in the first phase and a target to complete all reviews by December 2026. Entities reviewed so far include National Highway Authority, Pakistan Railways and Pakistan State Oil.

On privatisation, the government has reported progress on a list of 27 entities, including developments related to Pakistan International Airlines and First Women’s Bank. However, private sector participation in power distribution companies has been delayed as authorities address investor concerns.

Plans are also under consideration for restructuring the Roosevelt Hotel through a joint venture model, with the appointment of a new financial adviser underway.

The revised SWF framework is expected to define its role as a vehicle to facilitate foreign investment and support strategic commercial ventures through co-investment, rather than direct ownership transfers, in line with IMF requirements.