Forensic audit of loss-making enterprises on anvil

ISLAMABAD: The government on Monday sought proposals to approve forensic audit of major loss-making state-owned enterprises that should be liquidated or privatised on priority basis.

Adviser to the Prime Minister on Finance and Revenue Hafeez Shaikh directed the officials to complete formalities for the forensic audit of the major loss making state-owned enterprises (SOEs).

He was chairing a meeting of the cabinet committee on SOEs. Shaikh asked the officials to share with the committee information about the availability of sufficient forensic audit expertise within the Accountant General of Pakistan, the estimated cost in case the auditis to be outsourced to leading audit firms, the proposed time duration of forensic audit, and a proposed list of loss-making entities for forensic audit.

“Line ministries/divisions may also be consulted to select the companies (which) may not be concentrated in a particular sector,” he said. “These proposals need to be finalised by the next meeting of the committee.” For the last two years, the government has been indecisive about what to include and exclude in the privatisation list of state-owned enterprises that cause massive losses to the government. Last year, the government announced to privatise 50 SOEs within the next five years. Not a single transaction has been completed so far.

The cabinet meeting was briefed on the triage of state-owned entities. The triage was undertaken for liquidation, privatisation and retention under government ownership, on the basis of economic rationale and financial performance of SOEs.

The committee discussed the proposed SOEs for retention, privatisation and for restructuring. “The list should be reviewed and revisited till the next meeting and a new category may be introduced in the list where ownership may be retained by the government and the entity can be operated by the private sector for better management,” Shaikh said.

A draft of law on the state owned enterprises was also discussed in the meeting. It was told that the law might be reviewed further in consultation with the line ministries/divisions and the law division. The government had committed with the International Monetary Fund (IMF) to complete triage and submit the law before the parliament till September last. Last year, the IMF agreed to lend $6 billion to help Pakistan overcome the balance of payment crisis.

In late March, IMF paused discussions with Pakistan on the second review of the three-year extended fund facility program following the coronavirus outbreak. That review’s conclusion is imperative for the country to bag the third tranche of around $450 million under the facility. However, the Fund approved $1.4 billion under the rapid financing instrument for coronavirus challenges.