IMF objects to delay in update of SOEs evaluation

ISLAMABAD: The International Monetary Fund (IMF) has raised objections over the delay in updating the state-owned enterprises (SOEs) evaluation and launch of report by the end of December under the structural benchmark of $3 billion standby arrangement (SBA) programme.

When this scribe contacted the Ministry of Finance spokesman Qamar Abbasi to ask about the launch of SOEs’ report in line with the IMF agreement, he replied that it would be completed by the end of December 2023.

The IMF had placed a structural benchmark under the $3 billion SBA programme whereas it was agreed the Central Monitoring Unit (CMU) will issue its first periodic report on the performance of SOEs, using the latest available data, to the federal government by December-end.

The Ministry of Finance informed the IMF that the CMU was created in the ministry in September 2022 to improve SOEs’ monitoring and oversight functions and provide better analysis at the aggregate SOEs level. The CMU’s full operationalisation will be completed with hiring of the staff required and publishing of its first periodic report on the performance of SOEs in terms of Section 31(3) of the new SOEs law, using the latest available data.

The IMF staff stressed enacting the new SOE law in early 2023, and called for swift progress, with the ADB support, on: (i) developing a new ownership policy; (ii) amending several SOE-dedicated Acts (end-November 2023 SB, 12); (iii) advancing the delayed full operationalisation of a CMU within the MoF (end-November 2023 SB, 12); (iv) gradually reducing the footprint of the state (based on the March 2021 SOE Triage and including the divestment of two LNG-based power plants, one development finance institution, and one small public bank); and (v) continuing with regular and timely audits of key SOEs.

It asked to improve state-owned enterprise (SOE) governance by: (i) operationalising the recently approved SOE law into a policy that clarifies ownership arrangements and the division of roles within the federal governments; and (ii) amending the Acts of four selected SOEs to make the new SOE law fully applicable to those SOEs till end of November.

The Ministry of Finance spokesman said: “We are committed to improving SOEs’ governance, transparency, and efficiency as well as limiting their fiscal risks. In addition to the operationalisation of CMU within the MOF (7) that will improve the government’s SOE monitoring, specific actions include our new SOE law took effect in December 2022 and, inter alia: (i) ensures that SOE operations are grounded on a commercial footing, including by defining what constitutes a commercial SOE; and (ii) strengthens oversight and ownership arrangements. We are now working with the ADB support to finalise further regulatory reforms, including (end-November 2023 SB): (i) operationalising the recently approved SOE law into a policy that clarifies ownership arrangements and the division of roles within the federal government; and (ii) amending the Acts of four selected SOEs to make the new SOE law fully applicable to those SOEs.

“We are currently targeting the National Highway Authority, Pakistan Post, Pakistan National Shipping Corporation, and Pakistan Broadcasting Corporation.

“The SOEs are continuously audited by external auditors and their audit reports are usually published, while the Auditor General conducts the ‘compliance with authority’ audit of the accounts of SOEs. In addition, we have asked our Auditor General to conduct special audits of several SOEs (i.e., SSGCL, HESCO, and PESCO) because of their size and importance in their sectors. The respective line ministries are currently in the process of defining the scope and terms of reference in consultation with all relevant stakeholders and plan to secure the necessary approvals for commissioning the audit by the end of FY23,” the spokesman added.