PSO proposes debt swap for equity in companies
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KARACHI: Pakistan State Oil, the country’s largest oil marketer, says it is in talks with the government on a plan to acquire stakes in public sector energy companies and offset mounting debt it is owed by firms such as the national airline.
Stopping the pile-up of unresolved debt across Pakistan’s power sector, and ultimately settling it, is a top concern of the International Monetary Fund, with which Islamabad begin talks this month for a new long-term loan deal.
“Everything will be done through competitive bidding and we will participate and if we win, the stakes will be offset against (PSO’s receivables),” said Syed Muhammad Taha, the managing director and chief executive of state-backed PSO.
“That is our proposal and this is under consideration, so we are working with the government,” Taha said in an interview on Wednesday with Reuters, which is the first to report the plan.
Government officials, including the petroleum minister and the information minister, did not reply to a Reuters request for comment.
Total circular debt in Pakistan’s power and gas sectors stood at Rs4.6 trillion ($17bn), or about 5pc of GDP by June 2023, the IMF says.
The government is either the biggest shareholder, or outright owner of most these companies, making it tough to resolve debt as fiscal tightening leaves it strapped for cash. Among other steps sought by the IMF, Pakistan has raised energy prices to stop the build-up of debt. But the accumulated amount still has to be resolved.
Taha said the IMF reforms helped the sector by boosting creditors’ ability to pay, which will continue to improve.
PSO’s aggregate receivables from government agencies and autonomous bodies stood at Rs499bn, the largest share owed by SNGPL, whose largest shareholder is the government.
Taha said PSO had initially floated the idea of acquiring stakes or complete ownership of assets such as power plants in Nandipur in Punjab and Guddu in Sindh, as well as the state-owned holding entity for power generation companies.
Published in Dawn, May 10th, 2024
