Pakistan’s state-owned enterprises (SOEs) have once again come under intense scrutiny after the release of a sobering half-yearly performance report (July–December 2025) by the Central Monitoring Unit (CMU) of the Ministry of Finance. The report, published recently, reveals a significant downturn in revenues and profitability of federal SOEs and highlights the power sector as the most critical area of concern, with staggering losses that are threatening the country’s overall financial stability.
The findings paint a worrying picture of systemic inefficiencies, poor governance, and delayed structural reforms that continue to undermine the viability of SOEs, many of which have long been plagued by mismanagement and a heavy dependence on government bailouts.
📉 Revenue and Profitability Drop in SOEs
According to the CMU report, during the first half of the fiscal year 2025, the combined revenue of federal SOEs declined by 8 percent, while gross profits dropped by 10 percent. The report includes performance data from over 200 public-sector companies, ranging from power generation and distribution firms to transportation, oil and gas, and financial institutions.
Key Figures:
- Total Revenue (July–Dec 2024): Rs 6,459 billion (7.9% lower than the previous year)
- Gross Profit: Rs 457 billion
- Total Net Profit (after adjustment): Rs 114 billion, up from Rs 101 billion last year (+12%)
- Losses from unprofitable SOEs: Rs 343 billion
Despite a marginal increase in net profit, primarily due to accounting adjustments and cost controls in a few entities, the overall trend remains bleak.
⚡ Power Sector: The Core of Financial Woes
The power sector continues to be the single largest contributor to the financial distress in Pakistan’s SOE landscape. As per the report, the cumulative losses in the power sector have ballooned to Rs 5,900 billion, representing a grave fiscal liability for the government.
Circular Debt Breakdown:
- Total Circular Debt in Power Sector: Rs 4,900 billion
- Share of Power Sector Entities: Rs 2,400 billion
- Operational Deficit of DISCOs (Distribution Companies): Rs 283.7 billion (in six months alone)
Power distribution companies, known as DISCOs, are operating at unsustainable loss levels without government subsidies. These losses are driven by multiple factors:
- Widespread electricity theft
- Poor infrastructure, resulting in line losses
- Delayed transmission upgrades by the National Transmission and Dispatch Company (NTDC)
- Low-efficiency power generation companies using outdated technology
These inefficiencies not only widen the gap between electricity cost and revenue collection but also strain the fiscal capacity of the state, which continues to pour in billions in subsidies and financial aid just to keep the system running.
🔌 Government Response: Minister’s Claim vs. Ground Reality
Interestingly, the report came just a day after Federal Minister for Energy, Owais Leghari, claimed that Rs191 billion in losses were saved during FY2025 due to anti-theft drives and improved recovery mechanisms. While this is a positive step, the broader picture remains dire.
Despite these recovery efforts, the overall system performance remains dismal, with debt accumulation continuing to surge. According to the CMU report, the total outstanding debt of SOEs has reached Rs 8,831 billion, including interest, unpaid dues, and rollover liabilities.
💸 Debt and Contingent Liabilities
The CMU’s financial performance summary further reveals a mounting debt burden, not only due to operational losses but also due to structural financial obligations, such as:
- Contingent liabilities from government guarantees: Rs 2,245 billion
- Unfunded pension liabilities: Primarily in Pakistan Railways and DISCOs
- Rollover risks: Associated with Foreign Reliant Loans (FRLs) and Cash Development Loans (CDLs)
These liabilities, although not immediate cash outflows, are ticking time bombs for future fiscal planning. Any call on these guarantees would create additional pressure on the national budget, which is already constrained by external debt repayments and limited revenue growth.
⛽ Impact on Oil and Gas Sector and Financial Institutions
The report also indicates that the revenue decline was not limited to the power sector. Other critical industries, such as oil and gas and banking/finance, also witnessed downturns due to external market shocks and domestic monetary policy adjustments.
Key Factors for Decline:
- A significant drop in global oil prices, reducing profitability for oil marketing companies
- Declining domestic interest rates, which impacted the earnings of financial institutions reliant on spread-based income
- Currency volatility and limited investment activity, affecting capital markets and asset valuation
🏗️ Asset and Equity Position of SOEs
Although performance indicators on profitability and revenue show a downward trend, there was some improvement in the asset base and net equity, suggesting that some companies may still have the capacity to recover if managed well.
Financial Metrics:
- Total liabilities increased by 1.03% to Rs 3,100 billion
- Total assets grew by 3.75% to Rs 3,700 billion
- Net equity rose by 18.8% to Rs 6,629 billion
This marginal improvement could be attributed to:
- Revaluation of fixed assets
- Government capital injections in select SOEs
- Internal restructuring in a handful of entities, such as Pakistan Post and PIA’s Ground Handling Division
🔄 Reform Delays and Weak Governance Continue to Haunt SOEs
The persistent underperformance of SOEs in Pakistan is not a new phenomenon. For decades, governments have failed to implement deep structural reforms. The lack of political will, bureaucratic delays, and resistance from vested interests have stymied attempts to:
- Privatize loss-making entities
- Enforce corporate governance frameworks
- Implement merit-based leadership appointments
- Restructure debt and pension liabilities
In the absence of a clear and enforceable SOE reform policy, most entities continue to rely on financial injections from the treasury, which limits fiscal space for development expenditures like education, healthcare, and infrastructure.
🛠️ What Needs to Be Done?
Experts and economists have long warned that unless radical reforms are introduced in the governance and financial structure of SOEs, these entities will continue to be a drag on the national economy. Key recommendations include:
- Immediate Audit and Classification of all SOEs based on viability
- Privatization or Public-Private Partnerships (PPPs) for loss-making entities
- Appointment of professional CEOs and independent boards
- Reduction in political interference
- Strict monitoring of performance KPIs
- Creation of an independent SOE Reform Commission
📊 Final Analysis: A Ticking Fiscal Time Bomb
The Rs 5,900 billion in losses in the power sector, combined with the Rs 8,831 billion in total SOE debt, paints a stark picture for Pakistan’s fiscal future. These figures are not just numbers—they represent wasted taxpayer money, missed development opportunities, and a looming threat to macroeconomic stability.
While the government’s recent focus on improving power theft prevention and increasing recoveries is commendable, these are short-term fixes. What Pakistan needs is a long-term structural overhaul of its public sector enterprises to ensure they stop bleeding the economy dry.
If timely action is not taken, SOEs will continue to be a black hole for public finances, pushing the country further into the arms of foreign creditors and austerity measures, with serious social and political consequences.
📅 Conclusion
The CMU’s half-yearly SOE performance report for 2025 is a wake-up call for policymakers, public finance managers, and citizens alike. Without a comprehensive roadmap for SOE reform—especially in the power sector—Pakistan risks deeper financial instability, slower economic growth, and a cycle of recurring crises.
