- Government support to state-owned enterprises exceeds Rs 1,021 billion amid fiscal concerns.
- Liabilities increase to Rp 29.7 trillion and net worth falls to Rp 5.49 trillion.
- Operational inefficiencies negatively impact the profitability of state-owned companies.
Pakistan's state-owned enterprises (SOEs) incurred total losses of Rs 905 billion during fiscal year 2022-23, representing a 23% increase over the previous fiscal year 2021-22.
This was revealed in a report titled “Annual Aggregate Report on Federal State-Owned Enterprises (SOE) for Fiscal Year 2023”, released on Tuesday by the Central Monitoring Unit (CMU) of the Finance Division.
These losses resulted in aggregate net losses of Rs 202 billion, reflecting a 25% year-on-year increase. Liabilities also increased to Rs 29,721 billion, a 20% increase indicating higher financial leverage.
Consequently, net worth decreased to Rp5.49 trillion, down 2.55%. The federal government remains concerned about overall portfolio volatility, with value at risk at higher levels.
In the electricity sector, particularly within the distribution companies (DISCO), losses remained significant. Aggregate losses in the power sector amounted to Rs 304 billion, despite Rs 759 billion being allocated to support the sector.
Furthermore, entities in the infrastructure sector, such as the National Highways Authority (NHA), incurred high financial costs, exacerbating the overall loss scenario.
The railway sector also contributed to the escalation of losses: aggregate losses over the last decade reached Rs 5,595 billion.
The Government of Pakistan provided aggregate support worth Rs 1,021 billion through capital injections (Rs 267 billion), grants (Rs 223 billion), subsidies (Rs 403 billion) and loans (Rs 128 billion). billion rupees) to sustain these state-owned enterprises and boost the economy.
However, this support represented more than 10% of federal budget revenues, highlighting significant fiscal strain.
Several risks were identified within the SOE sector, in particular a substantial blockage of working capital due to the aging of accounts receivable and payable across the chain, contributing to a circular debt exceeding 4 trillion of rupees.
Operational inefficiencies in the electricity sector continued to negatively impact the profitability of state-owned companies, cascading throughout the entire chain.
The guarantees provided amounted to 1,656 billion rupees, while the debt volume reached 3,545 billion rupees, and the interest accrued on NHA loans alone exceeded 1,100 billion rupees.
These high levels of debt and collateral pose significant risks to the sector, exposing it to both systemic and non-systemic risks.
Systemic risks include economic slowdowns, inflation and interest rate fluctuations, exacerbating financial pressure on state-owned enterprises and making debt service difficult.
Looking ahead, according to the report, improving corporate governance is essential, as more independent and technically qualified directors are needed to ensure effective governance and strong monitoring criteria, while maintaining a streamlined approach.
State-owned enterprises contributed 466 billion rupees to the national exchequer in taxes, an increase of 24%, while non-tax revenues, including sales taxes, royalties and levies, totaled 952 billion rupees, an increase of 58% . Dividends brought in Rs 63 billion, an increase of 43%.
