Pakistan’s fiscal landscape is under mounting pressure as the latest FY2025 Aggregate Report exposes alarming inefficiencies and financial strain within the country’s State-Owned Enterprises (SOEs). According to the report, for every Rs6 collected in taxes, the government channels Rs1 back into SOEs, highlighting the growing burden these enterprises place on national finances.
The report revealed that net adjusted losses for the SOE portfolio skyrocketed from Rs30.6 billion in FY2024 to Rs122.9 billion in FY2025, marking a dramatic deterioration in performance. While SOEs contributed Rs2,119.2 billion to the national exchequer through taxes and dividends, the government’s “Net Fiscal Flow” — the actual cash benefit after accounting for subsidies, loans, and equity injections — fell sharply by 91%, shrinking from Rs458.2 billion to just Rs40.7 billion. This has left the sector at a near fiscal breakeven, where each rupee of state support yields only Rs1.01 in return.
Experts warn that the reliance on sovereign-backed financing has intensified, with government guarantees rising 52% to Rs2,164 billion. This “re-profiling” of debt transfers commercial risk directly to the sovereign balance sheet, reducing fiscal space and raising concerns over long-term debt sustainability. Analysts describe this trend as a clear signal that Pakistan’s SOEs are moving from operational inefficiency toward posing systemic financial risks if corrective measures are not implemented swiftly.
The report further highlights the urgent need for compliance with International Financial Reporting Standards (IFRS), which the government mandates for all SOEs by February 2026. Historically, many SOEs engaged in “regulatory arbitrage,” deferring losses or masking inefficiencies on their balance sheets. With the transition to IFRS 9, circular debt receivables, long treated as guaranteed assets, must now be measured using Expected Credit Loss models. This adjustment is projected to significantly reduce equity levels and could “wipe out accumulated profits” for major players in the energy and gas sectors.
Governance deficiencies remain a critical concern. The report notes that 86% of SOEs are currently “critically non-compliant” with the SOE Act 2023, underscoring the gap between regulatory frameworks and operational practice. Weak governance structures, where management dominates financial and strategic discussions, often result in “operational firefighting” rather than proactive, strategic oversight. Experts stress that independent boards capable of interpreting complex financial metrics, including WACC and IFRS implications, are now a fiscal necessity rather than a discretionary feature.
Circular debt, long a structural challenge for energy and gas SOEs, remains a central obstacle. The adoption of IFRS 9 will compel entities to recognize expected credit losses, thereby reducing reported profits and highlighting the need for robust fiscal and operational discipline. Analysts note that this shift will fundamentally reshape the way financial performance and risk are reported in the public sector.
The FY2025 Aggregate Report serves as a wake-up call, urging the government to strengthen governance, enhance transparency, and implement rigorous financial oversight across SOEs. With rising losses and surging guarantees, Pakistan’s public sector enterprises must move beyond reactive management to strategic, disciplined financial stewardship if the country hopes to safeguard fiscal stability in the years ahead.
The findings underscore that governance, transparency, and adherence to international standards are no longer optional; they are essential pillars for maintaining the sustainability of Pakistan’s fiscal framework and the long-term viability of its state-owned enterprises.
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