Pakistan’s State-Owned Enterprises Face Economic Challenges

Muhammad Ghazali Aqeeq, a distinguished expert in international governance risk, has highlighted the significant economic hurdles Pakistan faces due to the fiscal performance of its state-owned enterprises (SOEs).

During the fiscal year 2024-2025, these entities collectively suffered losses amounting to Rs 851 billion. While this figure represents a 14.03% improvement over the preceding year, it underscores the pressing requirement for enhanced management strategies, Aqeeq noted.

Consequently, the adoption of Enterprise Risk Management (ERM) and robust Internal Audit Management practices has become crucial for Pakistan’s economic stability.

Financial Situation of SOEs

Aqeeq emphasized that a recent report from the Ministry of Finance casts light on the unstable financial condition of SOEs in Pakistan. The Rs 851 billion net loss places a considerable strain on the nation’s economy, reflecting persistent issues like operational inefficiencies, poor governance, and inadequate management. Although the decrease in losses is encouraging, the enduring financial issues indicate a need for comprehensive reforms, he stated.

IMF Recommendations

Considering these circumstances, the International Monetary Fund (IMF) has strongly recommended that Pakistan’s SOEs implement ERM and Internal Audit Management frameworks. These are not mere suggestions but essential measures to ensure accountability, transparency, and efficient operations.

The Role of ERM

Muhammad Ghazali Aqeeq, also the founder of Transvare Corporation, clarified that employing ERM allows SOEs to proactively manage risk by identifying and mitigating potential threats to financial performance. By integrating risk management into their operational framework, SOEs can better protect public funds and bolster their resilience against financial instabilities.

The Role of Internal Audit Management

Internal Audit Management complements ERM by providing independent evaluations of the effectiveness of risk management practices and internal controls. This ensures transparent financial operations and swift resolution of any anomalies. Together, these frameworks establish a strong governance foundation essential for restoring public confidence in SOEs.

By conforming to global best practices, Pakistan can improve its attractiveness to investors and stakeholders, fostering economic advancement and stability, he added.

The Need for Digital Transformation

Ghazali Aqeeq further explained that in today’s increasingly intricate financial environment, there is a growing need for digitally transformed ERM and Internal Audit Management tools, particularly for SOEs operating under IMF programs. Digital solutions offer various benefits that can substantially improve the effectiveness of auditing and risk management procedures.

Conclusion

Muhammad Ghazali Aqeeq emphasized that as Pakistan tackles the financial challenges presented by its state-owned enterprises, implementing Enterprise Risk Management and Internal Audit Management is not only beneficial but vital. With reported losses of Rs 851 billion for the fiscal year 2024-2025, the need for sound governance and accountability within SOEs is more critical than ever.

By embracing robust ERM frameworks and utilizing digitally transformed tools, Pakistan’s SOEs can improve operational efficiency, combat financial mismanagement, and ultimately contribute to the nation’s economic revitalization.