Pakistan’s request to shift the authority to appoint chief executives of state-owned enterprises (SOEs) from their boards to the federal government has been rejected by the International Monetary Fund (IMF), officials familiar with the discussions said, in a development that could affect governance reforms linked to the country’s ongoing loan programme.
According to the report, the government had proposed amending Section 18 of the State-Owned Enterprises Act, 2023, to allow the executive to directly appoint chief executive officers of SOEs instead of leaving the power with their respective boards. The proposal was discussed during recent review talks with the IMF for the release of a $1 billion tranche under the Extended Fund Facility (EFF), but the lender did not agree.
The IMF also declined a suggestion to appoint ex-officio board members from outside the relevant ministries, which officials said would have altered governance arrangements at public-sector companies.
Under the existing law, SOE boards are responsible for appointing chief executives on performance-based contracts and setting performance benchmarks to ensure accountability. Government officials argued that the proposed change was necessary after some boards did not endorse certain nominees.
This marks the second recent attempt by the finance ministry to expand bureaucratic oversight of leadership appointments in public-sector entities that has failed to materialise.
Earlier, lawmakers blocked a proposal to amend the law governing the Export-Import Bank of Pakistan that would have effectively given the finance division a decisive role in the hiring and removal of the bank’s president. Members of the National Assembly Standing Committee had objected to the proposal, citing concerns over excessive administrative control.
Separately, the IMF has asked Pakistan to amend the laws governing at least 10 SOEs in consultation with the Fund to align them with the SOE Act. The revised deadline for these amendments, including changes to the Exim Bank framework, is August 2026.
A recent performance report by the finance ministry highlighted governance weaknesses across the SOE sector, including prolonged reliance on interim chief executives and delays in permanent appointments in key entities such as Sui Southern Gas Company Limited and government-owned generation companies.
In several cases, overlapping leadership roles continue. At the National Highway Authority, Port Qasim Authority and Karachi Port Trust, chairpersons are also performing the functions of chief executives, while leadership at Gwadar Port Authority and Pakistan Railways has not been drawn from the private sector as envisaged under reform plans.
The report warned that long-running ad-hoc appointments have weakened operational stability in infrastructure, transport and energy-sector entities and slowed the implementation of restructuring initiatives. It also noted that many boards lack the required technical depth and independence despite being vetted by the Cabinet Committee on SOEs chaired by Finance Minister Muhammad Aurangzeb.
The financial performance of SOEs also deteriorated significantly during the first full fiscal year of Prime Minister Shehbaz Sharif’s current administration. Net losses increased by about 300 per cent, while the government provided fiscal support of around Rs2.1 trillion in FY2024-25, mainly through equity injections to help reduce circular debt. Subsidies, however, showed a modest decline over the same period.
