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Pakistan's State Enterprises Drain Rs2 Trillion Yearly, Crippling Economy

Pakistan's state-owned enterprises are a massive drain on public finances, with Rs2.1 trillion from tax revenues used to support them in the last fiscal year alone. Their total liabilities have ballooned to Rs9.57 trillion, approximately half the size of the annual federal budget. Despite repeated pledges under IMF programs to reform, privatize, and improve governance, successive governments have shown little political will to enact meaningful change. The crumbling power sector exemplifies the crisis, being the most indebted and receiving the largest share of equity injections while remaining commercially unviable.

Key Points: Pakistan's Loss-Making State Enterprises Bleed Public Funds

  • Rs2.1 trillion tax revenue diverted to SOEs
  • SOE liabilities equal half of federal budget
  • Power sector is most indebted segment
  • Government reform pledges see weak follow-through
2 min read

'Loss-making state enterprises bleeding Pakistan'

Pakistan's SOEs cost Rs2.1 trillion in public support last year, with total liabilities hitting Rs9.57 trillion, straining the national budget.

"public revenue is being recycled to sustain entities that together posted a net adjusted loss of Rs 122.9 bn - Dawn article"

New Delhi, Feb 18

Plagued by chronic losses and mounting debt, Pakistan's state-owned enterprises have for years drained public funds that could have been spent on sectors such as healthcare and education, with frequent equity injections, subsidies, loans and sovereign guarantees reducing the pressure on these entities to fix their inefficiencies and instead of reform, the outcome has been a growing pile of liabilities, a Pakistani media article said.

Poor political will, coupled with resistance from vested interests, continues to stall meaningful change, adding to the burden of taxpayers, according to an article in the Dawn.

According to the latest report of Pakistan's Central Monitoring Unit, out of 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.

- IANS

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Reader Comments

S
Sarah B
The numbers are staggering. Nearly one in every six rupees of tax revenue? That's unsustainable for any economy. It shows how crucial it is to have strong, independent institutions and a political will to make tough decisions. The power sector issues sound particularly dire.
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Priya S
It's a sad situation for their citizens. All that money could have transformed their education and healthcare systems. When the state fails to provide basic services because funds are wasted, it creates immense public frustration. Hope they find a way out of this mess for the sake of the ordinary Pakistani.
A
Aman W
This is why economic reforms and privatization are important, done transparently of course. Throwing good money after bad never works. The "vested interests" mentioned in the article are the real problem—they benefit from the status quo while the country bleeds. A lesson for all economies.
K
Karthik V
The circular debt of Rs 1.9 trillion in the power sector is mind-boggling. It reminds me of the discom issues we had in India a few years back. It takes strong political will to fix these things. UDAY scheme had its challenges, but at least there was an attempt to address the root causes. Hope our neighbor finds a solution soon.
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Nikhil C
While it's easy to point fingers, we should also look at our own house. We have had our share of loss-making PSUs. The key difference is the scale and the apparent lack of any reform roadmap. The article in Dawn is brave to publish this. Accountability starts with transparency. đź‘Ź

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