The debt incurred by Pakistan’s public sector enterprises (PSEs) has reached an unsustainable level of PKR 1.7 trillion thanks to the Islamabad government’s failure to carry out the mandatory reforms. In the financial year, the debt by the PSEs increased by PKR 43 billion, further deteriorating the country’s economic health.
Pakistan failed to bring reforms to improve the performance and financial stability of PSEs despite receiving aid from the Asian Development Bank (ADB). Under the Public Sector Enterprises Reform Programme, the Islamabad government was supposed to roll out major structural reforms. Notably, the ADB had in 2017 expressed concerns over the non-fulfilment of reform measures, which included privatisation of the PSEs.
In 2024, the situation remains unchanged. While the reforms including privatisation did not happen, the PSEs continued to eat a major share of Pakistan’s budget. In years 2024, budgetary allocation to PSEs grew by 104 percent, putting strain on taxpayers. The state-owned enterprises (SOEs) have become problematic for Pakistan’s financial situation. In the fiscal year 2023, the losses incurred by the SOEs was PKR 202 billion, which showed a 25 percent increase year-on-year.
The aggregate losses by the SOEs, primarily, those associated with power, infrastructure and railways, have caused aggregate losses of PKR 5,595 billion, revealed a finance ministry report. While the liabilities grew by 20 percent, indicating higher financial leverage, the net equity with the SOEs decreased by 2.55 percent. “Overall portfolio volatility remains of a significant concern for Federal Government with Value at Risk on the higher range,” reads the report.
Inefficiencies, financial losses, and corruption, besides outdated infrastructure, poor management, and recurring financial deficits are responsible for the poor performance of government-run companies, said Farhad Durrani, an advocate at the Peshawar High Court. “These issues arise primarily due to bureaucratic red tape, political interference, and lack of competitive pressures, which stifle innovation and responsiveness to market demands,” he said.
Despite the growth potential, government undertakings are losing money thanks to corruption, unprofessionalism and political interference, said Pakistani columnist Abdul Basit Alvi. “It is in the minds of government employees that whether you work or not, you will get paid after a month. After corruption, this mindset also played a big role in destroying our national institutions. Political governments have contributed equally to the destruction of these institutions by recruiting additional employees,” he said.
The National Highway Authority of Pakistan has caused the highest losses to the public exchequer. In the year 2022-23, the losses were PKR 413 billion while the accumulated losses since 2014 reached PKR 1,552 billion. Different electric supply agencies in Pakistan were responsible for depleting government funds as their performance and revenue remained negative.
Even Pakistan International Air (PIA) and Pakistan Railways are among the state-run companies that have led to huge losses to the public exchequer. While the net loss the PIA incurred has crossed PKR 100 billion, the debt it has accumulated is PKR 268 billion. Privatisation of the PIA is a part of the reforms suggested by the ADB and the International Monetary Fund (IMF).
Besides Pakistan’s national carrier, the railway department is facing huge liabilities of PKR 25 billion. Negligence, bureaucratic apathy and political instability. “PIA struggled with high operational costs, primarily due to rising fuel prices, reduced passenger volumes, and operational inefficiencies. The railways faced operational inefficiencies, outdated infrastructure, and high maintenance costs,” reads the finance ministry report.
State Bank of Pakistan, the country’s central bank, expressed concerns over the debt incurred by the PSEs continued to move along an upward trajectory even as they struggled to achieve financial viability. It took a dig at the Islamabad government for incomplete structural reforms, which widened the resource gap and revenue deficit. “With rising debt burden and its costly servicing, it has become challenging for the government to create space for spending on infrastructure, human capital development, and social protection, which are crucial for developing a competitive economy while achieving sustainable growth,” the bank noted.
The Islamabad government’s failure to bring reforms and privatise the public undertakings has pissed off Pakistani people. “These debt-ridden white elephants are a major drain on public finances and require regular bailout packages from the federal government, exposing its balance sheet to unnecessarily high risks of insolvency,” said strategy consultant Faran Mahmood, who graduated from Cambridge University.
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