Losses of state-owned enterprises exceed 44 thousand crore taka, increasing financial pressure on government: World Bank

Staff Report: PNN

The World Bank has expressed concern over the financial condition of state-owned enterprises in the country. A study by the organization states that in the fiscal year 2023–24, the combined losses of state-owned enterprises, excluding state-owned banks and financial institutions, stood at around 44,100 crore taka. During the same period, total net financial assistance, including subsidies and development support from the government to these institutions, increased to about 88,200 crore taka, which is equivalent to approximately 1.7 percent of the Gross Domestic Product (GDP).

The research report titled “Financial Performance and Financial Risks of State-Owned Enterprises in Bangladesh” states that increasing losses are creating significant pressure on public finances. As a result, investment opportunities in important sectors such as health, education, and social security are decreasing.

The report was published on Thursday at a hotel in the capital. The event was organized by the Finance Division and the World Bank. The study was conducted by the Policy Research Institute of Bangladesh (PRI).

It is mentioned in the report that the highest losses occurred in the power and energy sector. Bangladesh Power Development Board (PDB) alone incurred losses of more than 44,400 crore taka in the last fiscal year. High production costs, capacity payments to private power plants, and tariff rates lower than production costs have been identified as the main reasons.

In addition, various state-owned institutions such as Bangladesh Oil, Gas and Mineral Corporation, Bangladesh Rural Electrification Board, and Trading Corporation of Bangladesh are also continuously incurring losses.

The study also highlights governance deficiencies in the management of state-owned enterprises. Political influence, weak supervision, excessive bureaucratic control, and lack of financial transparency have been identified as major causes of poor performance.

A regional comparison was also included in the report. It states that the return on assets of Bangladesh’s state-owned enterprises was negative 5.2 percent, whereas in India it was 9.7 percent and in Vietnam about 11.9 percent.

The study recommends restructuring loss-making state-owned enterprises, forming professional boards of directors, making financial disclosures mandatory, and reducing political interference. It also suggests gradually privatizing or shutting down long-term loss-making institutions that are not essential to national interest.

Among those present at the event were the Prime Minister’s Investment and Capital Market Adviser Tanvir Gani, World Bank official Suraiya Jannat, and PRI Executive Director Dr. Khurshid Alam, along with other stakeholders.