Bangladesh’s state-owned enterprises drained nearly Tk882 billion from public finances in a single year, with the World Bank warning that the growing burden has become one of the country’s biggest fiscal risks.
A new study found that the worsening financial condition of state-owned enterprises, known as SOEs, is “unsustainable” as Bangladesh faces weaker revenue collection, slower economic growth and mounting pressure on government spending.
The report said losses incurred by public enterprises were diverting funds away from sectors such as healthcare, education and social protection.
The findings were presented on Thursday at a dissemination workshop in Dhaka on the report, Financial Performance and Fiscal Risk of SOEs in Bangladesh. The study was conducted under the Strengthening Public Financial Management for Better Service project with support from the Policy Research Institute of Bangladesh.
According to the report, non-financial SOEs recorded a combined adjusted loss of Tk441 billion in the 2024 financial year. Total net fiscal transfers from the government, including subsidies and development funding, rose to around Tk882 billion, equivalent to 1.7% of gross domestic product.
The study identified the energy and power sector as the main source of the losses. The Bangladesh Power Development Board alone posted losses exceeding Tk444 billion in FY2024. The report attributed this to high electricity generation costs, expensive capacity payments to private power producers and power tariffs kept below production costs.
It also said politically influenced investment decisions, controversial agreements with independent power producers and weak corporate governance had severely damaged the sector’s financial sustainability.
Other major loss-making organisations included the Bangladesh Oil, Gas and Mineral Corporation, the Bangladesh Rural Electrification Board, the Trading Corporation of Bangladesh and several manufacturing corporations operating in the fertiliser, sugar and jute sectors.
The report noted that many manufacturing SOEs continued to suffer persistent losses despite operating in competitive markets where private firms remained profitable.
It also highlighted broader governance weaknesses across Bangladesh’s SOE structure, citing fragmented laws, bureaucratic control, weak oversight and poor financial transparency as key causes of underperformance.
The study compared Bangladesh unfavourably with regional peers. While Bangladesh’s SOEs posted a negative return on assets of 5.2% in FY2024, comparable enterprises in India generated a positive return of 9.7%, while Vietnam recorded around 11.9% in recent years.
According to the findings, Bangladesh could potentially mobilise more than Tk1.2 trillion in additional fiscal resources if SOEs achieved a 10% return on assets and reduced their reliance on government subsidies.
The report recommended sweeping reforms, including restructuring commercially viable enterprises, appointing independent and professionally managed boards, strengthening financial disclosure requirements and reducing political interference. It also called for gradually opening monopoly sectors to competition.
For enterprises that continue to incur chronic losses without serving strategic national interests, the report suggested eventual privatisation or closure.
Tanvir Ghani, special assistant to the prime minister on investment and capital market affairs, attended the workshop as special guest.
Suraiya Zannath, the World Bank’s lead governance specialist and team leader for the project, outlined the objectives of the study and said the analysis would help shape future policy and institutional reforms.
Hasan Khaled Foisal, additional secretary at the Finance Division, presented an overview of SOEs, debt management and the broader macro-fiscal situation. Rahima Begum, also an additional secretary at the Finance Division, discussed the Public Financial Management Reform Strategy 2025-2030 relating to state-owned enterprises.
Henri Fortin, lead public sector specialist at the World Bank, spoke about international experiences of SOE reform, while senior governance specialist Immanuel Frank Steinhilper examined global trends involving public enterprises.
Dr Khurshid Alam, executive director of the Policy Research Institute, delivered the keynote presentation on the financial performance and fiscal risks of Bangladesh’s state-owned enterprises. The session was conducted by Mohammad Atikuzzaman, senior financial management specialist, and closing remarks were delivered by World Bank economist Nazmus Sadat Khan.
