Page 55 - CMA Journal (May-Jun 2026)

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A r t ic le S ec t ion

These SOEs have contributed to the economy in terms SOEs is attributed to government’s reluctance or Unfunded pension liabilities” in
State-Owned Enterprises: Draining Taxpayers Money of revenue and employment generation as well as delayed action to implement cost-re ective tari the balance sheets are another
scal time bombs ready to
adjustments, due to political reasons, which result in
ful lling other social and strategic objectives as
exhibited in Table 1. revenue shortfalls. explode any time. As of June
However, despite having an asset base of trillions of In terms of net position, the situation has worsened 2025, the State-owned
rupees but persistently posting losses, these SOEs have with the outgoing nancial year witnessing 301% enterprises owe Rs. 2.03 trillion
now evolved into a crisis where they have become a surge in net losses which increased from Rs. 30.6 billion to its employees. Alarmingly,
direct impediment to national scal framework. As per in FY2024 to Rs. 122.9 billion in FY2025, as displayed in these liabilities have never been
the latest available release on Consolidated SOE Table 3. Despite holding a massive asset base of Rs. provisioned for, meaning no
position by the Ministry of Finance, the book value of 37,988 billion, FY 25 saw net margin of -0.3% meaning funds are set aside to meet these
their assets was Rs. 37.9 trillion. In scal year (FY) thereby that the state is experiencing a net wealth obligations while interest
2024-25, commercial SOEs collectively had revenues of erosion each passing year. accumulates daily.
Rs. 12.4 trillion (approx.) while on net level they SOE’s performance has historically been divided into
recorded losses of Rs. 122 billion, which was 300% “Pro t making SOE’s” and “Loss making SOE’s.” Aggregate This crisis is the direct result of
higher than net losses (Rs. 30.64 billion) incurred by pro ts across the pro t making SOE’s portfolio declined decades of systemic nancial mismanagement
them in FY 2023-24. to Rs. 709.9 billion in FY2025 in Table 4, which is a at the state level. Crucially, the reported Rs. 2.03
Huzaima Bukhari Dr. Ikramul Haq Abdul Rauf Shakoori trillion gure represents in Table 6, highlighting
a conservative oor. O cial government reports
admit that the actual liability of entities like
The fundamental model that lies at the core of every rather than for chronic incompetence of public Pakistan Railways remains completely unknown,
tax system around the world is that the businesses and enterprises that were created to serve them. Pakistan’s indicating that these unfunded pension
citizens of the country surrender a portion of their State-owned enterprises are classic examples of this obligations constitute a massive scal risk.
earnings to the government. On a quid pro quo basis, sorry state of a airs where hundreds of billions of Lacking any dedicated funding reserves, these
the government in return deploys those funds for the taxpayers’ money goes down the drain. immediate payout obligations must be kept
welfare of the public by building modern, Historically, the role of State-Owned Enterprises (SOEs) a oat through annual cash grants from the
infrastructure, o ering health facilities, improving has been signi cant in Pakistan’s economy. These national budget.
schools for quality education, providing security and enterprises were established to lay the foundation for
maintaining law and order as well as o ering industrialization, infrastructure development, address Over time, changing economic policies,
business-friendly environment leading to shared market dynamics and facilitate public. The footprint of technological advancements, and shifting
prosperity. global market dynamics have diminished the
these SOEs is spread across various sectors such as role and economic contribution of SOEs. Today,
However, no scal framework, or governance model, as energy, transportation, telecommunications, nance, these entities face acute operational and
well as economic literature has ever imagined a system manufacturing, hospitality and are directly owned or nancial challenges, struggling to maintain
in which citizens are made to pay not for the welfare controlled by both federal or provincial governments.
basic commercial viability due to deeply
entrenched institutional ine ciencies, chronic
Table 1: Breakdown of SOEs in Pakistan oversta ng, and subpar management practices.

Segment Sector Companies Subsidiaries Total
Furthermore, heavy bureaucratic hurdles, a
Commercial Oil & Gas 9 8 17 Total revenue for the commercial entities declined reduction of 13% as compared to Rs. 820.7 billion in distinct lack of innovation, and reliance on
Commercial Power 24 1 25 from Rs. 13,524 billion in FY2024 to Rs. 12,430 billion in FY2024. This is a concerning situation where pro table obsolete technology severely restrict daily
operational e ciency. Compounding these
Commercial Financial 20 16 36 FY2025 as seen in Table 2, a contraction of entities/segments are also becoming white elephants.
approximately Rs. 1,093 billion or roughly 8%. These The report states that decline is driven by a technical failures, systemic governance de cits,
Commercial Trading & Marketing 4 2 6 signi cant declines signal a structural weakening in combination of rising operational costs, delayed tari Moreover, in Table 5, the sum of losses of top four and widespread structural ine ciencies that severely most notably political interference, nepotism,
compromise their market competitiveness.
loss-making SOEs contributes around 67.2% to the
Commercial Industrial Development 4 4 8 the commercial performance of large SOEs, adjustments, and subdued commercial throughput. total losses of SOEs portfolio in 2024-25, these entities and administrative corruption, have completely
particularly in the power, oil & gas (O&G), and transport More than 50% of pro tability comes from 4 entities The crisis extends beyond the income statement, undermined the broader institutional
Commercial Manufacturing, Mining & Engineering 8 10 18 are National Highway Authority (NHA), Quetta Electric
sectors. namely i.e. OGDCL, Pakistan Petroleum, National Bank posing an even greater risk at the balance sheet level. framework necessary for transparent
Commercial Infrastructure, Transport & ITC 13 24 37 of Pakistan and WAPDA. Supply Co. (QESCO), Peshawar Electric Supply Co. SOE nancial liabilities now threaten the country’s
The aforementioned report mentions the reasons that (PESCO) and Pakistan Railways. operations.
Commercial Miscellaneous 6 4 10 include for example in the power sector, chronic tari On the ip side, the aggregate losses attributed to entire scal framework. Total accrued interest has
Total- Commercial 88 69 157 and pricing misalignments that continue to suppress SOEs marginally reduced to Rs. 833 as compared to Rs. According to these results, the nancial viability of surged to Rs. 2,184,490 million. Since these entities
realizable revenue coupled with the issue of circular 851.4 billion in FY2024 i.e. a 2% reduction showing SOEs is now unsustainable. Constant sector losses have cannot service their debts, unpaid interest
Non-Commercial Education, Training & Skills Development 12 - 12 debt accumulation and distribution losses, causing modest progress. However, the underlying problems transformed these entities into a continuous drain on compounds, driving up nancial costs exponentially.
Non-Commercial Funds, Foundations & Welfare Trusts 13 1 14 further aggravation. Additionally, loss-making still remain unaddressed. The annual loss of Rs. 832.8 the national exchequer, consuming hundreds of Further, circular debts in power and gas sectors have
Non-Commercial Sectoral Development 21 8 29 enterprises in rail and aviation underperform billion translates to approximately Rs. 3 billion per day billions of rupees annually. This poor performance reached Rs. 1.9 trillion and Rs. 2 trillion respectively,
commercially, with constricted revenues on account of in losses, highlighting the need for structural reforms stems from deep-rooted governance issues, including

Total-Non-Commercial 46 9 55 which in itself cast challenges on their overall
aging infrastructure and operational ine ciencies. and addressing chronic issues like oversta ng, pricing political interference, a lack of operational autonomy,
Prima facie, a common reason for ine ciency across all distortions, and governance de cits. sustainability, exhibited in Table 6.
Source: SOE Report 2025
ICMA’s Chartered Management Accountant, May-Jun 2026 53