Pakistan shelves plan to privatise power firms, angering IMF

Pakistan has shelved plans to privatise its power supply companies and will miss deadlines to sell other loss-making state firms, reneging on promises Islamabad had made to the IMF in return for a $6.7 billion bailout three years ago.

Two government officials with direct knowledge of the situation said International Monetary Fund officials meeting with Pakistani officials in Dubai this week were angered by the backtracking, but they expected the IMF would still release the remaining $1.6 billion to be disbursed.

The IMF is due to announce its decision on the next tranche, expected to be $500 million, at a news conference later on Thursday.

For all the IMF's frustration over the privatisation delays, the government has pushed ahead on other reforms, the Pakistani officials said, though there is another unspoken reason why Islamabad can expect the money to keep coming with little more than a reprimand.

Western allies, and neighbours Afghanistan and India, fear an economic meltdown would create a witches brew in the nuclear-armed Muslim nation of 190 million, mostly poor people, whose fragile democracy is under internal attack from militants.

Still, economists said a rebuke would send a negative signal to international financial markets about Prime Minister Nawaz Sharif's government.

"It was embarrassing and brutal," a senior Pakistani official present at the meeting, told Reuters, describing the IMF's response when mission head Harald Finger was told that the government had decided not to sell nine power distribution companies because of fear of labour unrest.

"It was nothing less than a dressing down. If the IMF still doesn't penalise us, then all I can say is, 'We're very lucky,'" the official said.

The other source, a senior finance ministry official who was also in Dubai, confirmed the account.

The finance ministry did not respond to calls seeking comment. A spokesman for the IMF said the Fund would not comment during a mission review.

The IMF loan had helped Pakistan stave off a default in 2013, when dwindling foreign exchange reserves covered less than six weeks of imports. Pakistan's reserves have since swelled to $20.5 billion in January from $11 billion in mid-2013.