Bangladesh SOEs cost treasury Tk882b as losses mount: World Bank study

Bangladesh’s state-owned enterprises (SOEs) drained nearly Tk882 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 report said 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 warned that 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 Pan Pacific Sonargaon in Dhaka on Wednesday.

The study was conducted under the Strengthening Public Financial Management for Better Service (SPFMS) project with support from the Policy Research Institute (PRI) of Bangladesh.

According to the report, non-financial SOEs incurred a combined adjusted loss of Tk441 billion in FY2024, while total net fiscal transfers from the government, including subsidies and development funding, rose to around Tk882 billion, equivalent to 1.7% of GDP.

Tanvir Ghani, special assistant to the prime minister on investment and capital market affairs, attended the workshop as the special guest.

Suraiya Zannath, lead governance specialist and team leader of SPFMS at the World Bank, explained the context and objectives of the study and how the analysis could support policy and institutional reforms.

Hasan Khaled Foisal, additional secretary at the Finance Division, presented an overview of SOEs, debt management and the macro-fiscal situation, while Rahima Begum, additional secretary at the Finance Division, highlighted the Public Financial Management Reform Strategy 2025-2030 relating to SOEs.

Henri Fortin, lead public sector specialist at the World Bank, discussed international experiences of SOE reforms, while Immanuel Frank Steinhilper, senior governance specialist at the World Bank, presented global trends relating to SOEs.

Dr Khurshid Alam, executive director of PRI, delivered the keynote presentation on the financial performance and fiscal risks of Bangladesh’s SOEs. The session was conducted by Mohammad Atikuzzaman, senior financial management specialist, while Nazmus Sadat Khan, economist at the World Bank, delivered the closing remarks.

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 Tk444 billion in FY2024 due to high power generation costs, costly capacity payments to private power producers and electricity tariffs 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 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.

It also highlighted deep corporate governance weaknesses within Bangladesh’s SOE structure, identifying 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% in FY2024, India’s SOEs generated a positive return of 9.7% and Vietnam’s recorded around 11.9% in recent years.

According to the study, Bangladesh could potentially mobilise more than Tk1.2 trillion in additional fiscal resources if SOEs achieved a 10% return on assets and reduced 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 the eventual privatisation or closure of chronically loss-making enterprises that no longer serve strategic national purposes.