The Asian Development Bank (ADB) and Pakistan today signed a $300 million loan to support Pakistan’s efforts to implement major structural reforms and efficiency initiatives to improve the performance, transparency, and financial sustainability of the country’s federal government-run public sector enterprises (PSEs).
Xiaohong Yang, ADB’s Country Director for Pakistan and Tariq Mahmood Pasha, Secretary Economic Affairs Division (EAD) for the Government of Pakistan, signed the loan agreement in Islamabad.
“Pakistan’s state-owned enterprises provide vital services to the people of Pakistan and to the country’s economy,” said Xiaohong Yang, ADB’s Country Director for Pakistan. “ADB is proud to support the government of Pakistan’s commitment to implement reforms that will ensure financially sustainability of these firms while improving efficiency and cost-effectiveness.”
The financial performance of many federal government PSEs in Pakistan — which employ more than 400,000 people — have been weak in recent years, despite significant budget support from the federal government.
The Program will support the government’s efforts to improve the performance of the PSEs by improving corporate governance and accountability, identifying and reducing financial burdens arising out of direct budgetary transfers to PSEs. This will strengthen fiscal sustainability and freeing of finances for priority development projects.
ADB’s assistance is the second subprogram under the PSEs Reform Program, bringing total ADB financing for critical reforms in PSEs to $600 million since June 2016.
With ADB’s assistance, under the Public Sector Enterprises Reform Program, the government of Pakistan has carried out significant structural reforms and efficiency initiatives to help improve financial sustainability and operational efficiency of PSEs, and helped improve the compliance to the Corporate Governance Rules 2013.
Many policy actions have been introduced under the program to improve the financial transparency, monitoring, and corporate governance in PSEs. A critical target under the program’s second subprogram is to increase the compliance rate of companies to Corporate Governance Rules to 50%. The restructuring and reform of selected public sector enterprises, particularly Pakistan Railways, have also been initiated. Under the program, government has started publishing the financial performance report of all federal PSEs which will be available on its website.