IMF Rejects Pakistan Proposal to Shift SOE CEO Appointment Powers to Govt

Pakistan’s bid to shift authority over appointments of state-owned enterprise chiefs from boards to the federal government has been rejected by the International Monetary Fund (IMF), complicating efforts to tighten executive control over loss-making public companies as negotiations continue over the release of a $1 billion loan tranche under the Extended Fund Facility (EFF).

The Fund also rejected a suggestion to appoint ex-officio board members from outside the relevant ministries, another step that officials said would have reshaped governance arrangements at public companies.

Under current law, SOE boards are responsible for appointing chief executives on performance-based contracts and setting benchmarks for accountability. Government officials argued the change was needed after some boards declined to endorse preferred nominees.

The request marks the second unsuccessful attempt in recent weeks by the finance ministry to increase bureaucratic oversight of public-sector leadership appointments.

Earlier, lawmakers blocked a proposal to amend the law governing the Export-Import Bank of Pakistan that would have effectively given the finance division veto power over the hiring and removal of its president. Members of the National Assembly’s standing committee objected to the move, citing concerns about excessive administrative control.

The IMF has separately required Pakistan to amend laws governing at least 10 SOEs in consultation with the lender to bring them in line with the SOE Act. The deadline for the changes, including revisions to the Exim Bank framework, has been extended to August 2026.

A recent finance ministry performance report underscored governance weaknesses across the sector, highlighting prolonged reliance on interim chief executives and delays in permanent appointments in major entities such as Sui Southern Gas Company Limited and government-owned power generation companies.

In some cases, overlapping leadership roles persist. At the National Highway Authority, Port Qasim Authority and Karachi Port Trust, chairpersons are also performing chief executive functions, while leadership at Gwadar Port Authority and Pakistan Railways has not been drawn from the private sector as envisioned under reform plans.

The report warned that ad-hoc appointments lasting years have weakened operational stability in infrastructure, transport and energy companies and slowed implementation of restructuring initiatives. It also noted that many boards lack technical expertise and independence despite being vetted by the Cabinet Committee on SOEs, chaired by Finance Minister Muhammad Aurangzeb.

Financial performance across the sector has deteriorated sharply. Net losses of SOEs rose about 300% in the first full fiscal year of Prime Minister Shehbaz Sharif’s current administration, while fiscal support reached roughly Rs. 2.1 trillion in FY2024-25, driven largely by equity injections to reduce circular debt. Subsidies declined modestly over the same period.