Pakistan is set to overhaul the legal structure of its Sovereign Wealth Fund (SWF) following stringent requirements laid out by the International Monetary Fund (IMF) to ensure fiscal discipline and governance transparency. Under these new commitments, the fund will remain non-operational until the parliament approves specific amendments designed to curtail its independent financial powers. The Express Tribune has reported that these legislative changes are a core component of the ongoing structural benchmarks linked to international financing reviews. The revised framework effectively pivots the fund away from its original purpose of executing direct asset sales and instead redefines it as a holding company tasked with the management of various State-Owned Enterprises (SOEs).
This legislative shift represents a significant departure from the initial law enacted in 2023, which granted the fund the authority to transfer and sell shares of high-value national assets to foreign investors. These assets included major entities such as the Oil and Gas Development Company, Pakistan Petroleum Limited, Mari Petroleum, and the National Bank of Pakistan, among others. The International Monetary Fund expressed deep concerns regarding the previous setup, specifically highlighting potential issues with transparency and the risk of selling national assets without a competitive bidding process. Under the newly proposed guidelines, the Sovereign Wealth Fund is strictly prohibited from selling assets directly to either local or international buyers. Instead, any future disposal or privatization of state assets must adhere to open and competitive procedures with full disclosure of beneficial ownership at every stage.
The restrictions imposed by the IMF extend deep into the financial operations of the fund, creating a firewall against off-budget liabilities. The Sovereign Wealth Fund will be completely barred from incurring any form of debt, providing guarantees, or offering collateral for loans. Additionally, it is prohibited from lending to public or private entities, participating in public-private partnerships, or receiving any direct funding from the State Bank of Pakistan or other financial institutions. Perhaps most notably, the fund will no longer have the authority to retain its generated revenues for reinvestment purposes. All proceeds must be transferred directly to the federal government, with any subsequent capital allocations being managed strictly through the federal budget under the Public Finance Management Act of 2019.
Beyond financial constraints, the governance model of the Sovereign Wealth Fund is undergoing a rigorous cleanup to align with international standards. Appointments to the board of directors and advisory bodies must now follow a merit-based and transparent selection process to ensure institutional independence. The accountability measures defined under the State-Owned Enterprises Act will apply fully to the fund and its managed subsidiaries, ensuring that no entity remains outside the scope of national oversight. Pakistan has also assured international creditors that any previous exemptions granted to the fund will be withdrawn to create a level playing field and maintain fiscal safeguards. These amendments are expected to be formally incorporated into the legal system following the approval of the next fiscal year budget.
While these reforms take shape, the government is also busy streamlining the broader State-Owned Enterprise sector with a goal to complete all entity reviews by December 2026. So far, ten major entities, including Pakistan Railways and Pakistan State Oil, have undergone assessment as part of an effort to bring them in line with modern corporate standards. Regarding privatization, progress has been reported on a list of twenty-seven entities, including Pakistan International Airlines, although the transition of power distribution companies to private management has faced delays due to investor concerns. The redefined role of the Sovereign Wealth Fund is now expected to focus on facilitating foreign investment through co-investment models rather than the direct transfer of ownership, marking a new era of regulated strategic commercial ventures in Pakistan.
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