New Delhi, February 18 – Plagued by chronic losses and mounting debt, state-owned enterprises (SOEs) in Pakistan have for years drained public funds that could have been spent on sectors such as healthcare and education. Frequent equity injections, subsidies, loans, and sovereign guarantees have reduced the pressure on these entities to fix their inefficiencies, resulting instead in a growing pile of liabilities, according to a Pakistani media article.
According to an article in Dawn, poor political will, coupled with resistance from vested interests, continues to stall meaningful change, adding to the burden of taxpayers.
According to the latest report from Pakistan's Central Monitoring Unit, out of the Rs12.97 trillion collected in taxes in the last financial year, about Rs2.1 trillion — nearly one in every six rupees — was redirected towards SOEs to keep them afloat. In effect, public revenue is being recycled to sustain entities that together posted a net adjusted loss of Rs 122.9 bn for the year.
The report highlights that government support to these entities in the past fiscal year jumped 37 per cent to Rs 2.079 trillion, driven mainly by Rs 729 bn in fresh equity injections and an expansion in official lending. Even though direct grants and subsidies have declined, the overall financial burden on the exchequer continues to grow.
Total SOE liabilities have climbed to Rs 9.571 trillion, roughly half the annual federal budget. Unfunded pension obligations alone stand at Rs2.03 trillion. Meanwhile, the circular debt remains stuck at around Rs1.9 trillion despite repeated capital injections.
The article pointed out that successive governments have failed to live up to the promise of restructuring, privatising or improving the governance of these enterprises. Under various IMF programmes — including the current one — Islamabad pledged greater transparency, regular performance audits and the appointment of professional independent boards. But follow-through has been weak.
The deep-rooted problems of the public sector are most visible in the crumbling power sector. It is the least liquid and most heavily indebted segment of the state system, reflecting a broader failure of governance.
The power sector has received the largest share of government equity injections and fiscal support. With mounting losses and negative equity, the sector leadership appears unable to run it as a viable commercial enterprise, the article lamented.