Pakistan's State-Owned Enterprises Suffer from Worsening Finances

Strategic Insights -

Pakistan's state-owned enterprises (SOEs) have accumulated losses and unfunded pension liabilities of nearly Rs7.5 trillion, more than three times the country's defence allocation for FY26. The losses and liabilities have surpassing Rs5.8 trillion, with Rs342 billion incurred in just six months. The Ministry of Finance informed the Cabinet Committee on State-Owned Enterprises (CCoSOEs) that despite repeated increases in electricity and gas tariffs, the circular debt in the oil, gas, and power sectors has surged to over Rs4.9 trillion, severely affecting cash flows and asset valuations.

Key Takeaways:

  • The cumulative losses and unfunded pension liabilities of SOEs have crossed Rs7.5 trillion.
  • Total SOE losses now exceed Rs5.8 trillion, with Rs342 billion incurred in just six months.
  • The circular debt in the oil, gas, and power sectors has surged to over Rs4.9 trillion, severely affecting cash flows and asset valuations.
  • Government fiscal support to SOEs via grants, subsidies, loans, and other injections exceeded Rs600 billion in just six months.
  • Unfunded pension liabilities in power distribution companies (Discos) and other SOEs estimated at Rs1.7 trillion remain off the government's books.
  • Government guarantees currently stand at Rs2.2 trillion, while costs related to debt rollovers and financial restructuring further tighten fiscal space.
  • A lack of strategic alignment and operational inefficiencies were identified as urgent areas for reform.
  • Finance Minister Muhammad Aurangzeb called for urgent reform in the power and energy sectors and vowed to push through governance and operational reforms to ensure the financial sustainability of public sector entities.
  • The committee approved the appointment of chairpersons for Quetta Electric and Gujranwala Electric, as well as the constitution of the Board of Directors for the Independent System Market Operator (ISMO) and an independent director for GENCO Holding Company Ltd (GHCL).

Statistics:

  • Cumulative losses and unfunded pension liabilities of SOEs: Rs7.5 trillion
  • Total SOE losses: Rs5.8 trillion
  • Circular debt in the oil, gas, and power sectors: Rs4.9 trillion
  • Government fiscal support to SOEs: Rs600 billion
  • Unfunded pension liabilities: Rs1.7 trillion
  • Government guarantees: Rs2.2 trillion
  • Appointment of chairpersons for Quetta Electric and Gujranwala Electric
  • Constitution of the Board of Directors for ISMO
  • Appointment of an independent director for GENCO Holding Company Ltd (GHCL)

Sources:

  • Pakistan Today - "Cumulative losses and unfunded pension liabilities of SOEs cross Rs7.5 trillion"
  • Dawn - "State-owned enterprises' cumulative losses cross Rs5.8 trillion"
  • The Express Tribune - "Circular debt surges to over Rs4.9 trillion, severely affecting cash flows and asset valuations"
  • Ministry of Finance - "Cabinet Committee on State-Owned Enterprises (CCoSOEs) Meeting on Friday"