Bangladesh’s state-owned enterprises are draining massive resources from the public purse, with losses reaching unsustainable levels and crowding out vital spending on health, education, and social protection, a new World Bank study warns.

Bangladesh’s state-owned enterprises (SOEs) have become one of the country’s most significant fiscal burdens, costing the national exchequer nearly Tk882 billion in a single year, according to a fresh World Bank report.

The study, titled “Financial Performance and Fiscal Risk of SOEs in Bangladesh,” paints a stark picture of deteriorating public sector finances at a time when the country grapples with falling revenue collection, slower economic growth, and rising pressure on public resources.

The findings were unveiled on Thursday at a dissemination workshop. Conducted under the Strengthening Public Financial Management for Better Service (SPFMS) project with support from the Policy Research Institute (PRI) of Bangladesh, the report underscores how mounting SOE losses are diverting funds that could otherwise support essential public services like healthcare, education, and social safety nets.

Massive Losses Concentrated in Energy Sector

Non-financial SOEs recorded a combined adjusted loss of Tk441 billion in FY2024, while total net fiscal transfers from the government – including subsidies and development funding – reached approximately Tk882 billion, equivalent to 1.7 per cent of GDP. The energy and power sector accounted for the lion’s share of these losses.

The Bangladesh Power Development Board (BPDB) alone posted losses exceeding Tk444 billion in FY2024. Key drivers include high power generation costs, expensive capacity payments to private power producers, and electricity tariffs deliberately kept below production costs. The report points to politically influenced investment decisions, controversial contracts with independent power producers (IPPs), and chronic weaknesses in corporate governance as major factors undermining the sector’s financial health.

Other significant loss-makers include the Bangladesh Oil, Gas and Mineral Corporation (Petrobangla), the Bangladesh Rural Electrification Board (BREB), the Trading Corporation of Bangladesh (TCB), and various manufacturing entities in fertiliser, sugar, and jute. Notably, many of these manufacturing SOEs continue to bleed money despite operating in competitive markets where private firms manage to remain profitable.

Poor Governance and Underperformance Compared to Peers

The study highlights deep-rooted corporate governance deficiencies across Bangladesh’s SOE landscape. Fragmented legal frameworks, excessive bureaucratic control, weak oversight mechanisms, and a lack of financial transparency are identified as primary culprits behind the persistent poor performance.

In a damning regional comparison, Bangladesh’s SOEs recorded a negative return on assets (ROA) of -5.2 per cent in FY2024. By contrast, India’s SOEs achieved a positive ROA of 9.7 per cent, while Vietnam’s posted around 11.9 per cent in recent years. The report estimates that if Bangladesh’s SOEs could reach a 10 per cent ROA and reduce subsidy dependence, the country could potentially unlock more than Tk1.2 trillion in additional fiscal resources.

Tanvir Ghani, Special Assistant to the Prime Minister on Investment and Capital Market Affairs, attended the workshop as the special guest. Senior officials from the Finance Division, including Additional Secretaries Hasan Khaled Foisal and Rahima Begum, presented overviews of SOE operations, debt management, macro-fiscal scenarios, and the Public Financial Management Reform Strategy 2025-2030.

World Bank experts also contributed. Suraiya Zannath, Lead Governance Specialist and SPFMS team leader, outlined the study’s objectives and policy implications. Henri Fortin, Lead Public Sector Specialist, shared international SOE reform experiences, while Immanuel Frank Steinhilper, Senior Governance Specialist, discussed global trends. Dr Khurshid Alam of PRI delivered the keynote address, with Nazmus Sadat Khan, WB Economist, providing closing remarks.

Urgent Reforms Needed to Avert Crisis

The report describes the current trajectory of SOE finances as “unsustainable.” It calls for comprehensive reforms to restore fiscal stability and improve efficiency. Recommendations include:

• Restructuring commercially viable SOEs for better performance.
• Establishing independent, professionally managed boards.
• Strengthening financial disclosure and transparency requirements.
• Reducing political interference in operations and decision-making.
• Gradually introducing competition in sectors currently dominated by monopolies.

For chronically loss-making enterprises that no longer serve clear strategic national interests, the study suggests eventual privatisation or orderly closure.

These reforms come at a critical juncture for Bangladesh’s economy. With public finances already strained, unchecked SOE losses risk exacerbating fiscal deficits, limiting space for development spending, and undermining investor confidence. Successful implementation could not only stem the bleeding but also free up substantial resources for priority areas like human capital development and infrastructure.

Experts at the workshop emphasised that addressing SOE inefficiencies is not merely a technical exercise but a governance challenge requiring strong political will. As Bangladesh navigates post-pandemic recovery and prepares for potential LDC graduation challenges, transforming the SOE sector from a fiscal liability into a productive asset will be crucial for long-term economic resilience.