The World Bank has raised concerns about the $8 billion Pakistan Sovereign Wealth Fund (SWF), emphasizing the governance and fiscal management difficulties it presents. The exemption of certain State-Owned Enterprises (SOEs) from the stringent corporate governance norms of the SOE Act complicates oversight, according to the bank’s recent fiscal report on Pakistan’s federal SOEs.
Profitable entities like the Oil and Gas Development Company Limited and Pakistan Petroleum Limited have been moved to the SWF, which has significant implications for the economic landscape. These entities are substantial contributors to the nation’s GDP through dividends. The World Bank suggests the SWF adopt a definitive dividend policy and adhere to the SOE Act to ensure financial transparency and good governance.
The World Bank advises that the SWF be classified as a commercial SOE for better oversight, aligning with international best practices. It also recommends that the fund undergo annual evaluations to assess its adherence to its mandate and consider joining the International Forum of Sovereign Wealth Funds to maintain governance and protect stakeholders’ interests.
The report also shines a light on the heavy fiscal costs of consistently loss-making SOEs in key economic sectors. Despite significant government support through subsidies and other financial mechanisms, these SOEs’ contributions are outweighed by the fiscal support they receive. The World Bank suggests rapid progress on government plans for privatization and restructuring to contain fiscal risks.
In its final recommendations, the World Bank calls for the implementation of reforms to enhance the financial discipline of SOEs and to strengthen oversight under new governance acts. The government is urged to eliminate the practice of covering SOE losses with federal budget transfers and to implement measures that manage fiscal risks, including adherence to International Financial Reporting Standards (IFRS) and developing risk monitoring procedures. This comprehensive approach is deemed crucial for stabilizing the fiscal position of the government while ensuring that SOEs are held accountable for their performance and the financial risks they introduce. For the latest Real Estate News and Blogs, visit Realtorspk blogs.
