ISLAMABAD: The federal government has taken another step under its IMF programme by amending the 2023 State-Owned Enterprises (SOEs) Ownership and Management Policy, introducing stronger financial reporting and audit requirements for public sector entities.
The government is also working on a mechanism to recover more than Rs110 billion in outstanding electricity dues from the provinces.
Under the amended SOE policy, public sector entities will be required to maintain their accounts in accordance with International Financial Reporting Standards (IFRS).
The Finance Division will formulate a financial management framework in consultation with the Auditor General of Pakistan. The move is aimed at improving governance, strengthening transparency and reducing financial risks associated with public entities.
All SOEs will also be required to adopt internal audit procedures. The existing SOE policy provides for internal audit mechanisms and requires Finance Division involvement in developing the financial management framework for statutory SOEs.
SECP, State Bank rules to apply
The amended policy provides that concessions proposed for companies in general will also apply to state-owned enterprises, subject to compliance with the relevant Securities and Exchange Commission of Pakistan (SECP) policy.
For banking-related entities, regulations issued by the State Bank of Pakistan will apply, according to the notification.
The government has said the changes are intended to bring public sector financial reporting closer to global standards while strengthening oversight of state-owned entities. The Finance Division lists the IFRS-related amendment to the 2023 SOE policy as an official notification dated October 2.
Govt plans recovery of Rs110bn power dues
Separately, the federal government has informed the IMF about a plan to recover more than Rs110 billion in outstanding electricity dues from the provinces.
A mechanism has been agreed between the Power Division and Finance Division to deduct the arrears from provincial shares under the National Finance Commission (NFC) Award. More than Rs110 billion in provincial electricity arrears has been reconciled, hile around Rs50 billion is expected to be recovered in the near term, according to sources.
The IMF has raised concerns about the financial impact of deducting electricity arrears from provincial NFC shares, as provincial revenues are already under pressure.
The lender has also sought a combined provincial cash surplus of Rs1.7 trillion and cash grants of Rs1.036 trillion, according to sources. The IMF’s concern is that additional deductions from provincial transfers could create further financial difficulties for the provinces.
Circular debt rises to Rs1.675tr
The discussions with the IMF also covered the rising power-sector circular debt. The debt increased by Rs61 billion during the last fiscal year, reaching Rs1.675 trillion by June 30.
The Power Division attributed the increase to reduced subsidies and payment disputes with distribution companies, while the IMF questioned why available savings had not been used to reduce the circular debt stock.
The government told the IMF that smart meters are being installed to help resolve electricity billing disputes with provincial governments.
Uniform electricity tariff also discussed
The IMF also questioned whether Pakistan would retain the uniform electricity tariff after the privatisation of power distribution companies.
Under the current arrangement, consumers of both efficient and inefficient distribution companies are charged the same tariff. The government did not provide a clear response on whether the uniform tariff would be eliminated after privatisation, according to sources.
