Pakistan’s sovereignty ultimately depends on achieving financial freedom and self-reliance.
We should not let near-term economic challenges cloud our long-term thinking and direction towards this goal. One key step towards achieving this goal is the creation of the Pakistan Sovereign Wealth Fund (PSWF).
A sovereign wealth fund will provide Pakistan with a mechanism to preserve and grow the nation’s wealth. Furthermore, it will arm the government with the financial cushion to stabilise the foreign exchange rate and close funding gaps during times of volatility and economic stress.
PSWF allows Pakistan to become an investor in foreign capital markets and work with global co-investors.
In a world where nations are primarily driven by economic motivations, PSWF will give Pakistan the international standing it deserves as well as leverage in global affairs.
PSWF will not be an overnight creation — it will deliver results over the long term and hence the groundwork must be laid now.
In my view, the key gating items of setting up PSWF are identification of funding sources and putting in place an appropriate governance framework.
Generating surplus funds for PSWF might seem virtually impossible given the current economic situation but there are clear avenues that need to be further explored.
These avenues include profitable state-owned enterprises (SOE) such as Oil and Gas Development Company Limited and Pakistan Petroleum Limited.
In 2018-19, the top ten SOEs generated a combined profit of almost Rs300 billion. Overall, SOEs made a loss of Rs143bn in the same period. This shows massive subsidisation of inefficient and loss-making entities by the profitable ones. The profitable SOEs can become important contributors to PSWF.
