Bangladesh’s state-owned enterprises (SOEs) have drained nearly Tk 882 billion from the national exchequer in a single year, emerging as one of the country’s biggest fiscal risks, according to a World Bank study.
The study highlighted that the deteriorating financial condition of public enterprises has become “unsustainable” at a time when Bangladesh is already facing falling revenue collection, slower economic growth and mounting pressure on public finances.
It said the growing losses of SOEs are consuming resources that could otherwise be invested in healthcare, education and social protection.
The findings were presented at a dissemination workshop on the report titled “Financial Performance and Fiscal Risk of SOEs in Bangladesh” held at a city hotel on Thursday.
The study was conducted under the “Strengthening Public Financial Management for Better Service” programme, with support from the Policy Research Institute of Bangladesh (PRI).
According to the study, non-financial SOEs incurred a combined adjusted loss of Tk 441 billion in fiscal year 2023-24, while total net fiscal transfers from the government, including subsidies and development funding, climbed to around Tk 882 billion, equivalent to 1.7 percent of GDP.
The study found that the energy and power sector accounted for the overwhelming majority of the losses.
The Bangladesh Power Development Board alone recorded losses exceeding Tk 444 billion in FY24 due to high power generation costs, costly capacity payments to private power producers and electricity tariffs that are kept below production costs.
The report said politically influenced investment decisions, controversial contracts with independent power producers and weak corporate governance have severely undermined the sector’s financial sustainability.
Other major loss-making entities include the Bangladesh Oil, Gas and Mineral Corporation, Bangladesh Rural Electrification Board, Trading Corporation of Bangladesh and several manufacturing corporations in the fertiliser, sugar and jute sectors.
The report observed that many manufacturing SOEs continue to incur persistent losses despite operating in competitive markets where private firms remain profitable.
The report also highlighted deep corporate governance weaknesses within Bangladesh’s SOE structure.
It identified fragmented laws, bureaucratic control, weak oversight and lack of financial transparency as key reasons behind poor performance.
The report compared Bangladesh unfavourably with regional peers. While Bangladesh’s SOEs posted a negative return on assets of 5.2 percent in FY24, India’s SOEs generated a positive return of 9.7 percent and Vietnam’s recorded around 11.9 percent in recent years.
According to the study, Bangladesh could potentially mobilise more than Tk 1.2 trillion in additional fiscal resources if SOEs achieve a 10 percent return on assets and reduce their dependence on subsidies.
To address the crisis, the report recommended wide-ranging reforms, including restructuring commercially viable SOEs, introducing independent and professionally managed boards, strengthening financial disclosure requirements, reducing political interference and gradually opening monopoly sectors to competition.
It also suggested eventual privatisation or closure of chronically loss-making enterprises that no longer serve strategic national purposes.
Tanvir Ghani, Special Assistant to the Prime Minister on Investment and Capital Market Affairs, attended the workshop as a special guest.
WB Lead Governance Specialist Suraiya Zannath explained the context and objectives of the study and how the analysis will help framing policy and institutional reform.
Additional Secretary of the Finance Division Hasan Khaled Foisal made a presentation on the overview of SOEs, debt management and the macro-fiscal scenario, while Additional Secretary Rahima Begum made the opening presentation highlighting the Public Financial Management Reform Strategy 2025-2030 relating to SOEs.
WB Lead Public Sector Specialist Henri Fortin discussed international experiences of SOE reform and its Senior Governance Specialist Immanuel Frank Steinhilper presented global trends relating to SOEs.
PRI Executive Director Dr Khurshid Alam made the keynote presentation on the financial performance and fiscal risks of Bangladesh’s SOEs.