Zafar Iqbal
Despite repeated assurances, reform roadmaps, and lofty declarations of intent, the government’s narrative on reviving Pakistan’s state-owned enterprises (SOEs) rings hollow when confronted with hard fiscal realities. In the first full fiscal year under Prime Minister Shehbaz Sharif, SOEs plunged deeper into financial distress, with cumulative net losses soaring nearly 300 percent—from Rs30.6 billion in FY2023-24 to a staggering Rs122.9 billion in FY2024-25. These figures, presented by the Finance Ministry at a recent Cabinet Committee on SOEs meeting, lay bare the widening gap between policy promises and actual performance.
A closer examination of the data paints an even more concerning picture. Overall revenues of SOEs fell by over 10 percent to Rs12.4 trillion in FY2024-25, while even profitable enterprises saw earnings lose momentum. Aggregate profits across profit-making SOEs slid 13 percent year-on-year to Rs710 billion, signalling that structural growth remains elusive. Loss-making SOEs offered little reprieve, with combined losses easing by only two percent—a margin too small to indicate any meaningful turnaround. Compounding the problem, SOEs drew Rs2.1 trillion in annual fiscal support, largely through equity injections to manage circular debt. This underscores that public resources are being spent to sustain inefficiency rather than address the structural failures dragging both the SOEs and the wider economy down.
While the Finance Ministry attributes part of the decline to falling international oil prices compressing margins, this explains only a fraction of the losses. The bulk is concentrated in a handful of entities, particularly the National Highway Authority and several power distribution companies (DISCOs). Chronic inefficiency, outdated infrastructure, misgovernance, and high financing costs have entrenched a self-perpetuating cycle of losses, especially in DISCOs, where line losses, electricity theft, and weak transmission networks continue to erode revenue. Even profitable SOEs often rely on guaranteed government contracts, raising doubts about their ability to compete in a truly open market.
Attempts at reform have been piecemeal and reactive, often driven by pressure from international lenders rather than a genuine commitment to restructuring. Effective change would require comprehensive sectoral reorganisation, deregulation to foster competition, and robust corporate governance frameworks that enforce accountability and transparency. Instead, political inertia and bureaucratic resistance have left reform plans largely on paper, execution patchy, and financial losses mounting.
Without decisive action to overhaul governance, strengthen accountability, and explore privatisation where appropriate, the government’s SOE reform narrative risks remaining meaningless, while the financial haemorrhage continues unabated. Pakistan’s SOEs, once seen as pillars of the national economy, now serve as a stark reminder that rhetoric alone cannot solve deep-seated structural crises.
he way forward for Pakistan’s state-owned enterprises requires a bold and multifaceted approach that goes beyond piecemeal interventions. First, the government must prioritise comprehensive governance reforms, introducing stringent accountability mechanisms, transparent reporting standards, and performance-based management structures across all SOEs. Second, financial discipline should be enforced by linking equity injections and fiscal support to measurable operational improvements, ensuring public funds are used to restore efficiency rather than simply cover losses. Third, strategic privatisation and public-private partnerships must be pursued selectively, targeting entities where private sector expertise can enhance productivity and competitiveness. Fourth, sector-specific restructuring plans should address the unique challenges of power distribution, transport, and other critical industries, including modernising infrastructure, reducing line losses, and eliminating systemic inefficiencies. Finally, reforms should be insulated from political interference, driven by long-term economic imperatives rather than short-term electoral considerations. By adopting this comprehensive, transparent, and results-oriented strategy, Pakistan can transform its SOEs from chronic fiscal burdens into productive, self-sustaining enterprises, contributing meaningfully to economic growth, job creation, and the stability of public finances. Only through decisive and sustained action can the promise of SOE reform move from rhetoric to reality, ending decades of inefficiency and unlocking their true potential as engines of national development.
