The Central Monitoring Unit (CMU), established under the Ministry of Finance as part of Pakistan’s IMF commitments, has raised concerns over governance inefficiencies in state-owned enterprises (SOEs). It has particularly criticised the disproportionate presence of non-independent and non-professional directors on SOE boards, along with ineffective audit and oversight mechanisms.
In its latest review of SOEs’ performance for the fiscal year 2023-24, the CMU highlighted that many public sector entities, especially in key industries like power, infrastructure, and gas, are dominated by internal stakeholders. This lack of independent oversight, it warned, allows entrenched management to make decisions that serve short-term interests rather than ensuring the long-term sustainability of these enterprises. The CMU stressed that without stronger accountability, SOEs would continue to underperform, increasing fiscal risks and eroding public trust.
The unit emphasised the need for governance reforms aligned with international financial and audit standards. It has recommended that at least 50% of board members in SOEs be independent professionals, as their presence could strengthen strategic oversight, enhance risk management, and align corporate policies with public interest and investor confidence.
The report also underscored the inadequacy of performance monitoring systems for SOE boards, noting that many enterprises lack clear key performance indicators (KPIs). Without standardised evaluation metrics, the CMU warned, board members tend to neglect long-term planning and compliance, leading to inefficient operations and financial losses. To counter this, it proposed a structured monitoring matrix incorporating sector-specific KPIs, particularly for industries like power, gas, and infrastructure.
Another major issue flagged by the CMU was the absence of a centralised database of qualified professionals for board appointments. This gap, it argued, results in delays in appointing directors and compromises the quality of governance. To remedy this, it urged the creation of a national database of prospective board members with expertise in finance, law, engineering, governance, and industry-specific domains.
The CMU’s findings reinforce concerns that have long plagued Pakistan’s public sector enterprises—politically motivated appointments, weak oversight, and financial inefficiencies. With the government under pressure to reform loss-making SOEs, these recommendations could play a crucial role in shaping future policies. However, whether meaningful changes will be implemented remains to be seen.
