Pakistan’s State-Owned Enterprises (SOEs) have recorded a loss of Rs342 billion in six months. According to reports, SOE losses coupled with unfunded pension liabilities have surpassed a staggering Rs7.5 trillion. 

 

Analysts have outlined how large the aforementioned liabilities are, drawing comparisons to highlight that they are over seven times larger than the budget for the Public Sector Development Programme (PSDP). Reports reveal that the Ministry of Finance informed the Cabinet Committee on State-Owned Enterprises (CCoSOEs) that total SOE losses have reached a whopping Rs5.8 trillion.

 

For reference, SOE losses alone account for approximately 33.14 percent of the federal budget approved for fiscal year (FY) 2025-26. Analysts have pointed out how these losses are likely to keep climbing unless the federal government privatizes loss making SOEs.

 

According to data from the Finance Division’s Central Monitoring Unit’s performance review, SOE’s tacked on an additional Rs342 billion to the total loss amount during the first half of FY 2024-25. Reports suggest that circular debt in the oil, gas and power sectors has jumped up to Rs4.9 trillion despite a considerable hike in electricity and gas rates over the past three years.

 

The uncontrolled rise in debt has resulted in disruptions in the cash flows of loss making SOEs. It merits a mention that SOEs recorded losses despite being given over Rs600 billion in support during the first half of FY 2024-25. According to reports, the aforementioned financial support, that was extended to the SOEs, came in the form of loans, grants, subsidies and other means.

 

SOEs’ unfunded pension liabilities have climbed up to Rs1.7 trillion. For reference, an unfunded pension liability is the shortfall between the money a pension fund has on hand and the total amount it owes to retirees. Reports reveal that unfunded pension liabilities are not registered on federal books.

 

Aside from issues pertaining to fiscal mismanagement, the cabinet committee was reportedly brought to speed regarding instances of misgovernance. As per reports, these instances of misgovernance include substandard disclosure practices as per the IFRS Section 30 and non compliance with regulatory requirements.

 

Finance Minister Muhammad Aurangzeb, who was chairing the CCoSOEs meeting, voiced his concerns surrounding the staggering Rs1.9 billion daily average loss incurred by SOEs. He also expressed intent to reform the power sector as circular debt from the sector is creating fiscal problems for Islamabad.