Islamabad, Dec 29: Pakistan’s state-owned enterprises (SOEs) are facing significant financial challenges, with their cumulative losses hitting a staggering Rs. 408 billion for the first half of fiscal year 2024. This brings the total accumulated losses since 2014 to Rs. 5.9 trillion. The losses are outlined in the “Federal State Owned Enterprises bi-annual report for FY 2024,” published by the Central Monitoring Unit (CMU) of the Finance Division.
The National Highway Authority (NHA) recorded the highest loss of Rs. 151.3 billion, followed by QESCO (Rs. 56.2 billion) and Pakistan International Airlines (PIA) (Rs. 51.7 billion). Other notable entities with significant losses include PESCO, Pakistan Railways, SEPCO, Pakistan Steel Mills, and IESCO.
SOEs contributed Rs. 200 billion in taxes, a 14% decrease from the previous period. Non-tax revenues, including sales taxes, royalties, and levies, amounted to Rs. 349 billion, reflecting a 27% decline. Dividends were significantly reduced, showing a 71% decrease.
While many SOEs reported losses, certain entities were profitable. The Oil and Gas Development Company Limited (OGDCL) led with a profit of Rs. 123.2 billion, followed by PPL (Rs. 68.7 billion), and National Power Parks Management (Rs. 36.2 billion).
The government extended Rs. 436 billion in fiscal support over the six months, comprising Rs. 120 billion in grants, Rs. 231 billion in subsidies, and Rs. 85 billion in loans. However, no equity injections were made.
SOEs are grappling with liquidity problems due to prolonged receivables and payables, contributing to the circular debt, which has reached Rs. 3,447 billion on a gross basis. This is mainly due to inefficiencies in the power sector, especially with Distribution Companies (DISCOs).
The report also highlights the high debt burden of SOEs. The total value of loans, including accrued interest, stands at Rs. 9,274 billion, with a financial leverage of 6.6x and operating leverage at 1.9x, indicating a highly volatile and debt-laden portfolio.
Distribution companies (DISCOs) continue to face severe transmission and distribution losses averaging 10-15%. This amounts to significant financial losses, with the cost of lost electricity reaching approximately Rs. 140 billion in just six months.
PIA’s business plan is ineffective due to outdated practices and heavy reliance on government bailouts, leading to financial instability. Similarly, NHA is burdened with over Rs. 3 trillion in debt, hindering its ability to finance new infrastructure projects or even maintain existing ones.
The report stresses the need for improved cash flow management, risk mitigation, debt restructuring, and operational efficiency to address these systemic issues and improve the financial performance of Pakistan’s SOEs. Additionally, tackling circular debt and inefficiencies within the power sector is critical to stabilizing the sector and reducing fiscal pressures.
