Mounting SOE losses cost Bangladesh treasury Tk882b in a year: WB

Bangladesh’s state-owned enterprises (SOEs) placed a nearly Tk882 billion burden on the national treasury within a year, posing one of the country’s most significant fiscal threats, according to a World Bank study.

The report described the worsening financial condition of public enterprises as “unsustainable” at a time when Bangladesh is struggling with weaker revenue collection, slowing economic growth and growing pressure on state finances, a press release said.

It warned that escalating SOE losses are absorbing funds that could otherwise support key sectors such as healthcare, education and social safety programmes.

The findings were unveiled at a dissemination workshop on the report, “Financial Performance and Fiscal Risk of SOEs in Bangladesh,” held at Pan Pacific Sonargaon in Dhaka.

The study was carried out 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 recorded a combined adjusted loss of Tk441 billion in FY2024, while overall government fiscal support including subsidies and development financing surged to around Tk882 billion, equal to 1.7 percent of GDP.

Tanvir Ghani, Special Assistant to the Prime Minister on Investment and Capital Market Affairs, attended the event as special guest.

Suraiya Zannath, World Bank Lead Governance Specialist and SPFMS team leader, outlined the study’s objectives and its relevance to future policy and institutional reforms.

Hasan Khaled Foisal, Additional Secretary of the Finance Division, presented an overview of SOEs, debt management and the macroeconomic landscape, while Rahima Begum, also an Additional Secretary of the Finance Division, highlighted the Public Financial Management Reform Strategy 2025-2030 concerning SOEs.

World Bank Lead Public Sector Specialist Henri Fortin shared international experiences in SOE reform, while Senior Governance Specialist Immanuel Frank Steinhilper discussed global SOE trends.

PRI Executive Director Khurshid Alam delivered the keynote presentation on the financial performance and fiscal risks associated with Bangladesh’s SOEs.

The study found that the energy and power sector accounted for the bulk of losses. The Bangladesh Power Development Board (BPDB) alone suffered losses of more than Tk444 billion in FY2024, driven by high generation costs, costly capacity payments to private producers and electricity tariffs set below production costs.

The report blamed politically motivated investments, disputed contracts with independent power producers and weak governance for undermining the sector’s financial health.

Other major loss-making SOEs include Bangladesh Oil, Gas and Mineral Corporation, Bangladesh Rural Electrification Board, Trading Corporation of Bangladesh and several state-run enterprises in the fertiliser, sugar and jute industries.

The report noted that many manufacturing SOEs continue to suffer recurring losses despite competing in markets where private firms remain profitable.

It also identified major governance weaknesses across the SOE landscape, including fragmented legislation, bureaucratic control, weak oversight and limited financial transparency.

Compared with regional peers, Bangladesh performed poorly, with SOEs recording a negative return on assets of 5.2 percent in FY2024, against positive returns of 9.7 percent in India and around 11.9 percent in Vietnam.

The study estimated Bangladesh could unlock over Tk1.2 trillion in additional fiscal resources if SOEs achieved a 10 percent return on assets and reduced reliance on subsidies.

To tackle the crisis, the report recommended broad reforms, including restructuring commercially viable SOEs, appointing independent professional boards, strengthening financial disclosure, curbing political interference and gradually introducing competition in monopoly sectors.

It also proposed the eventual privatisation or closure of chronically loss-making enterprises that no longer serve strategic national interests.