SOEs Act 2023 Misused for Personal Enrichment, Costing Billions

ISLAMABAD: The State-Owned Enterprises (SOEs) Act 2023, a piece of legislation enacted under the guidance of the International Monetary Fund (IMF) and intended to overhaul Pakistan’s unprofitable state enterprises, has allegedly been exploited by high-ranking officials within these entities. These executives have reportedly used the Act to significantly increase their compensation and benefits, resulting in substantial financial losses for the national treasury.

According to well-placed government sources, an investigation is underway following revelations regarding the CEO of a state enterprise amassing considerable wealth through the manipulation of this law. The details uncovered have sparked concern within government circles, leading to a broader examination of potential misuse across various state-operated organizations.

Sources further indicate that the primary regulatory body overseeing these SOEs may also be complicit in benefiting top management.

Information is being compiled to assess the degree to which the Act has been leveraged for the personal gain of SOE executives, instead of promoting fiscal responsibility and enhanced governance.

Prime Minister Shehbaz Sharif has responded to these disclosures by forming a high-level committee. This committee will scrutinize the governance and financial practices of SOEs in relation to the 2023 Act, which was initially implemented to satisfy IMF requirements.

The committee will also consider whether to engage with the IMF to address the unexpected consequences of these reforms. The IMF advocated for the SOE Act 2023 to grant state-owned firms greater autonomy and reduce their financial burden on the government.

The legislation was designed to encourage competition, ensure openness, improve management practices, and subject SOEs to impartial audits following international standards to mitigate financial risks.

However, insiders claim that the law has been employed by SOE boards and executives to bestow upon themselves considerable financial advantages, even as numerous entities continue to underperform and strain public resources.

A senior government official stated, “The intention was to reform SOEs to benefit the public, but the opposite is occurring, with top officials enriching themselves at the expense of taxpayers.” Pakistan has more than 200 state-owned enterprises operating in vital sectors, including energy, insurance, aviation, banking, and transport.

Numerous SOEs have historically suffered from inefficiency, corruption, and poor management, resulting in billions in annual fiscal deficits, according to preliminary estimates.

The findings of the high-level committee will likely influence the government’s future actions, which may include strengthening oversight, revising the SOEs Act 2023, and potentially renegotiating certain elements of the IMF-backed reforms that have enabled such abuses.