ISLAMABAD: The government has constituted a four-member committee to determine the legal status of those state-owned entities (SOEs) which are not covered under the existing SOEs Act of 2023 but remain a major fiscal risk to the federal government for being their large size and impact.

According to a notification issued on Monday, the committee led by the Additional Secretary of Corporate Finance comprised the director-general of the newly created Central Monitoring Unit (CMU) on SOEs in the Ministry of Finance, Legislative Adviser Law & Justice Hassan Mehmood and Executive Director of the Securities and Exchange Commission of Pakistan (SECP) Mubasher Saeed.

Senior government officials said the SOEs Governance and Operations Act 2023 introduced in January 2023 covered most of the SOEs as required under the International Monetary Fund (IMF) for increased monitoring and vigilance over their financial health and impact on federal budget but there were still a large number of entities which had been established under their specific acts of parliament. The legal instruments relating to these SOEs would be examined in detail to identify legal hitches that needed to be removed and through what process.

However, the federal government took almost two years to approve and publish the SOEs Policy required under the SOEs Act of 2023 despite continuous prodding by the IMF. Under the policy, the CMU has now been established, albeit with limited staffing to have direct access to financial information of all the SOEs, particularly 85 larger entities, on a regular basis.

The sources said the MoF had recently issued directives to the various ministries, divisions and their attached departments and SOEs on their limited fiscal independence, notwithstanding their boards or directors. Many of such entities or their administrative ministries had different opinions in the light of their specific powers and jurisdictions for being created under specific acts of parliament.

The ministries and divisions would now be required to refer their “questions/queries relating to applicability of SOEs Act 2023 on any entity” to the said committee. The IMF required enhancing the SOEs legal and regulatory framework to ensure that SOEs operations are grounded on commercial footing and what actually defined commercial entities besides strengthening oversight through CMU.

Only recently, the caretaker government has revised laws relating to four such selected entities that had been created through specific acts of parliament including the National Highway Authority, Pakistan Post, Pakistan National Shipping

Corporation, and Pakistan Broadcasting Corporation to bring them under the applicability of the SOEs Act 2023. The government has committed to the IMF of “introducing further amendments to the four dedicated SOE laws during the parliamentary adoption process, in consultation with the IMF, such that they are fully aligned with key SOE corporate governance principles introduced in the new SOE Act.”

Published in Dawn, February 13th, 2024