SOE losses soar to Rs851bn in 2023-24: report

A shocking report was released on Wednesday by the Ministry of Finance (MoF) revealing that total losses of State Owned Enterprises (SOE) stood at a staggering 851 billion rupees during 2023-24. Moreover, the combined debt stock of SOE’s sits dangerously high at 9.2 trillion rupees.

According to financial experts, the accumulated debt stock is approximately equal to the entirety of revenues generated by the Federal Board of Revenue (FBR) which reflects poor financial management on the part of the directors who run these SOEs in question.

These findings came about from the Aggregate Annual Report of SOE’s which is compulsory under the current International Monetary Fund (IMF) programme which cash strapped Pakistan is a part of. As per the MoF, a few public entities generated meagre profits which were then invested in Pakistan’s Sovereign Wealth Fund (PSWF).

However, the gains from these investments were not enough to offset the losses causing the MoF to report a whopping net aggregate loss of 521.5 billion rupees. Moreover, the entities that generated the profits were left with strained cash flows as their money was used to assist loss making firms.

Collectively, the worst contributors to the colossally high loss value were companies in the power sector. These companies routinely cause losses which the general public has to shoulder. Islamabad is well acquainted with this fact as SOEs from the power sector significantly hurt the national exchequer.

However, the single largest loss was experienced because of the National Highway Authority (NHA) which stood close to 300 billion rupees. Combined, the SOEs wiped out 2.5 trillion rupees in economic value.

These losses were experienced despite a surge of 5.26 percent in the total revenues of the aforementioned SOEs. However, a closer look at their finances reveal that they faced a total net loss surge of 89 percent which translates into 13.5 trillion rupees. The losses were contained via federal grants and subsidies which reduced the aggregate loss value by an impressive 14 percent.

Many analysts consider privatisation to be a feasible avenue to save the national exchequer from the burden of inefficient SOEs. This might be the only way to effectively follow a contractionary fiscal policy to appease international lenders – as this will show creditors that Pakistan is willing to stringently follow austerity measures.

It is not yet clear how privatisation will be received yet as the book value of SOE assets grew by an enviable 6.37 percent on a year on year basis to 38.434 trillion rupees. On the other hand, Return on Equity (ROE), is negative sitting at an abysmal value of negative 0.5 percent. However, it is likely that the value could turn green once a profit maximising firm acquires these SOEs.