‘Pakistan confronting significant economic challenges due to SOEs' financial performance'
ISLAMABAD: Prominent international governance risk expert, Muhammad Ghazali Aqeeq, has stressed that Pakistan is confronting significant economic challenges due to the financial performance of state-owned enterprises (SOEs).
In the fiscal year 2024-2025, these entities reported a staggering combined loss of Rs 851 billion—a figure that, while reflecting a 14.03% decrease from the previous year, underscores the urgent need for effective management practices, he added.
Therefore, the implementation of Enterprise Risk Management (ERM) and Internal Audit Management has become essential for Pakistan.
Aqeeq maintained that the recent report from the Ministry of Finance highlights the precarious financial situation of SOEs in Pakistan. The net loss of Rs 851 billion represents a significant burden on the national economy – reflecting ongoing issues such as mismanagement, operational inefficiencies and poor governance. While, the decrease in losses is a positive sign, the persistent financial challenges reveal the necessity for systemic reforms, he added.
In light of these circumstances, the International Monetary Fund (IMF) has strongly advocated the adoption of ERM and Internal Audit Management frameworks within SOEs of Pakistan. These practices are not merely recommendations: they are essential for ensuring accountability, transparency and operational efficiency.
Muhammad Ghazali Aqeeq, who is also the founder of Transvare Corporation, explained that the implementation of ERM allows SOEs to adopt a proactive approach to risk management – systematically identifying and mitigating potential risks that could impact financial performance. By embedding risk management into their operations, SOEs can better safeguard public resources and enhance their resilience against economic shocks.
Internal Audit Management plays a complementary role by providing independent assessments of the effectiveness of risk management practices and internal controls. This oversight ensures that financial operations are conducted transparently and that any irregularities are promptly addressed. Together, these frameworks create a robust governance structure that is crucial for restoring public trust in SOEs.
By aligning with international best practices, Pakistan can enhance its appeal to investors and stakeholders – promoting economic stability and growth, he added.
Ghazali Aqeeq elaborated that in an increasingly complex financial landscape, the need for digitally transformed ERM and Internal Audit Management tools is more pressing than ever – especially for SOEs while we are operating under IMF programs. Digital solutions offer a myriad of benefits that can significantly enhance the effectiveness of risk management and auditing processes.
Muhammad Ghazali Aqeeq highlighted that, as Pakistan grapples with the financial challenges posed by its state-owned enterprises, the implementation of Enterprise Risk Management and Internal Audit Management is not just beneficial—it is indispensable. With a reported loss of Rs 851 billion in the fiscal year 2024-2025, the need for effective governance and accountability within SOEs has never been more urgent.
By adopting robust ERM frameworks and leveraging digitally transformed tools, Pakistan's SOEs can enhance their operational efficiency, combat financial misuse and ultimately contribute to the country's economic recovery.
Copyright Business Recorder, 2025
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Express Tribune
4 hours ago
- Express Tribune
Govt secures Rs1.275tr to address power sector debt
Listen to article The government has signed term sheets with 18 commercial banks for a Rs1.275 trillion ($4.5 billion) Islamic finance facility to help pay down mounting debt in its power sector, government officials said on Friday. The government, which owns or controls much of the power infrastructure, is grappling with ballooning "circular debt"—unpaid bills and subsidies—that has choked the sector and weighed on the economy. The liquidity crunch has disrupted supply, discouraged investment, and added to fiscal pressure, making it a key focus under Pakistan's $7 billion IMF programme. Finding funds to plug the gap has been a persistent challenge, with limited fiscal space and high-cost legacy debt making resolution efforts more difficult. Read More: Pakistan signs '$1b' loan facility "Eighteen commercial banks will provide the loans through Islamic financing," Khurram Schehzad, adviser to the finance minister, told Reuters. The facility, structured under Islamic principles, is secured at a concessional rate of 3-month KIBOR (the benchmark rate banks use to price loans) minus 0.9%, a formula agreed on by the IMF. "It will be repaid in 24 quarterly instalments over six years," and will not add to public debt, Power Minister Awais Leghari said. Existing liabilities carry higher costs, including late payment surcharges on Independent Power Producers of up to KIBOR plus 4.5%, and older loans ranging slightly above benchmark rates. Also Read: Banking sector expands 15.8% in 2024 Meezan Bank, HBL, National Bank of Pakistan, and UBL were among the banks participating in the deal. The government expects to allocate Rs323 billion annually to repay the loan, capped at Rs1.938 trillion over six years. The agreement also aligns with Pakistan's target of eliminating interest-based banking by 2028, with Islamic finance now comprising about a quarter of total banking assets.
Business Recorder
5 hours ago
- Business Recorder
Pakistan signs $4.5bn loans with local banks to ease power sector debt
KARACHI: Pakistan has signed term sheets with 18 commercial banks for a 1.275 trillion Pakistani rupee ($4.50 billion) Islamic finance facility to help pay down mounting debt in its power sector, government officials said on Friday. The government, which owns or controls much of the power infrastructure, is grappling with ballooning 'circular debt', unpaid bills and subsidies, that has choked the sector and weighed on the economy. The liquidity crunch has disrupted supply, discouraged investment and added to fiscal pressure, making it a key focus under Pakistan's $7 billion IMF programme. Finding funds to plug the gap has been a persistent challenge, with limited fiscal space and high-cost legacy debt making resolution efforts more difficult. 'Eighteen commercial banks will provide the loans through Islamic financing,' Khurram Schehzad, adviser to the finance minister, told Reuters. Power sector circular debt plan okayed by Cabinet The facility, structured under Islamic principles, is secured at a concessional rate of 3-month KIBOR, the benchmark rate banks use to price loans, minus 0.9%, a formula agreed on by the IMF. 'It will be repaid in 24 quarterly instalments over six years,' and will not add to public debt, Power Minister Awais Leghari said. Existing liabilities carry higher costs, including late payment surcharges on Independent Power Producers of up to KIBOR plus 4.5%, and older loans ranging slightly above benchmark rates. Meezan Bank, HBL, National Bank of Pakistan and UBL were among the banks participating in the deal. The government expects to allocate 323 billion rupees annually to repay the loan, capped at 1.938 trillion rupees over six years. The agreement also aligns with Pakistan's target of eliminating interest-based banking by 2028, with Islamic finance now comprising about a quarter of total banking assets.
Business Recorder
6 hours ago
- Business Recorder
Iran-Israel tensions threaten Pakistan's fragile recovery
The world is holding its breath as tensions between Iran and Israel reach a boiling point. What began as a shadow war – fought through covert attacks, cyber strikes, and regional proxies – now teeters on the edge of open warfare. For many, this may seem like another distant Middle Eastern flashpoint. But for Pakistan and other oil-importing, investment-hungry economies, the potential fallout from a full-scale Iran - Israel war could be immediate, destabilizing, and enduring. Trump to decide on US action in Israel-Iran war within two weeks, White House says The Strait of Hormuz Iran has long warned that if it is attacked directly, it would retaliate by closing or disrupting the Strait of Hormuz, through which nearly a fifth of the world's oil and one-third of global LNG passes. If war breaks out and the Islamic Revolutionary Guard Corps acts on this threat, the effect would be seismic. Oil prices could jump to $150–$180 per barrel, if not higher, within days. Energy markets would convulse, and strategic reserves would be tapped globally. For Pakistan, where nearly 30% of the import bill is fuel, this would mean an instant blowout of the current account deficit, a weakening rupee, and imported inflation feeding into everything from electricity tariffs to grocery prices. A rise in oil would also raise transport costs and production expenses for exporters – particularly in textiles and manufacturing – shrinking competitiveness just when the country is trying to climb out of economic stagnation. Iran says no nuclear talks under Israeli fire, Trump considers options US Involvement: The risk of a regional war Should Israel launch a significant military operation against Iran's nuclear infrastructure, U.S. involvement is almost guaranteed – if not militarily, then through security and diplomatic cover. Iran could retaliate through its extensive network of regional allies: Hezbollah in Lebanon, armed groups in Syria and Iraq, and the Houthis in Yemen. In response, Israel may strike across multiple fronts. The Gulf, already skittish, could be drawn into this widening circle of conflict. This would be a pan-regional war, not a bilateral spat – and global markets would respond accordingly. For Pakistani businesses and policymakers, this isn't just an oil story – it's about the collapse of confidence. Equity markets across the region would take a hit, FDI flows into emerging economies would pause, and the risk premium for countries like Pakistan – already contending with political instability and IMF obligations – would rise further. That means higher borrowing costs, capital flight, and declining investor appetite for anything deemed 'exposed to the region.' Trade corridors under threat Even beyond the Strait, Iran serves as a critical trade conduit to Central Asia and Turkey. With road and rail links passing through its territory, Pakistan has in recent years viewed Iran as a potential bridge to diversify trade routes. If Iran becomes a war zone or faces renewed and expanded US sanctions, these overland corridors could shut down indefinitely. The Pakistan-Iran-Turkey freight corridor, a pillar of Pakistan's regional trade ambitions, would collapse. And as regional tensions rise, other initiatives – such as Iran's role in China's Belt and Road – could also stall, indirectly affecting Pakistan's own CPEC trajectory. The perils of regime change Some voices in Western capitals quietly suggest that an Iran–Israel war could trigger regime change in Tehran. But regime change rarely brings instant democracy or economic liberalism. More often, it brings chaos, uncertainty, and power vacuums. In Iran's case, a collapsed regime could unleash internal civil strife, embolden separatist movements, and leave critical oil and gas infrastructure vulnerable. A successor regime – military, clerical, or revolutionary – might be more aggressive, not less. And either way, it would take years to stabilize one of the region's largest energy exporters, further compounding oil market disruption and regional instability. Implications for Pakistan Pakistan has always maintained a careful balancing act between Iran, the Gulf Arab states, and the West. A full-scale Iran–Israel war would make that balance nearly impossible to maintain. Pressures to align with either the OIC consensus or international sanctions regimes could limit Islamabad's diplomatic bandwidth and expose it to both economic and political costs. Moreover, if the conflict spreads to the Gulf, the implications for Pakistan's diaspora workers in Saudi Arabia, the UAE, and beyond – who send home billions in remittances – could be severe. Even minor disruptions to Gulf economies or airline connectivity would affect the lifeblood of Pakistan's foreign exchange. The Iran–Israel confrontation is no longer a question of if – but how far it spreads. For Pakistan and many in the Global South, the imperative now is economic preparedness: building energy buffers, accelerating regional trade alternatives, and strengthening diplomatic channels that could help de-escalate tensions. The current war has the power to reorder global energy, unsettle regional politics, and cast a long shadow over Pakistan's fragile economic recovery. The article does not necessarily reflect the opinion of Business Recorder or its owners
