Pakistan’s Finance Division has clarified that a decline in net fiscal flows from state-owned enterprises (SOEs) should not be viewed as an indication of weaker financial performance, noting that fiscal flows and profitability represent different measures. During the first half of fiscal year 2025-26, profitable SOEs generated aggregate profits of Rs423.3 billion, while loss-making entities reported combined losses of Rs342.8 billion, according to the Finance Division.
The government recorded Rs839.8 billion in inflows from state-owned enterprises during the period, against outflows of Rs804 billion. This resulted in a positive net fiscal flow of Rs35.8 billion. The Finance Division said the higher government outflows were significantly influenced by equity injections and financing associated with restructuring efforts and circular-debt management, meaning that changes in fiscal flows do not directly represent the overall profitability or operational performance of SOEs.
The Finance Division also pointed to increases in government receipts from state-owned enterprises during the period. Dividends received from SOEs rose by 26%, while their tax contributions increased by 10%. These figures provide additional indicators of the financial contribution made by state-owned entities to the government, separate from the broader fiscal transactions that can include financial support and other government-to-SOE payments.
According to the Finance Division, net fiscal flow primarily captures transactions between the government and state-owned enterprises, including government support, taxes, dividends, levies and other payments. Financial performance, meanwhile, is assessed through profitability as well as other financial and operational indicators. The division said that assessing SOE reforms only through a six-month comparison of fiscal flows would overlook structural measures already being implemented across the government-owned enterprise portfolio.
Several changes have already taken place as part of the government’s broader restructuring and privatisation programme. Utility Stores Corporation has ceased operations, while Pakistan Agricultural Storage and Services Corporation is being wound up. First Women Bank Limited and Pakistan International Airlines have been privatised. These developments form part of efforts to reduce the size of the state-owned enterprise footprint and address entities facing continuing operational and financial challenges.
The power sector is also undergoing changes, with nine distribution companies included in the government’s privatisation programme. These companies are at different stages of the transaction process and include Faisalabad Electric Supply Company, Gujranwala Electric Power Company, Islamabad Electric Supply Company, Lahore Electric Supply Company, Multan Electric Power Company, Hyderabad Electric Supply Company, Sukkur Electric Power Company, Peshawar Electric Supply Company and Hazara Electric Supply Company.
Alongside restructuring and privatisation, the government is pursuing governance reforms across the SOE portfolio. These measures include efforts to strengthen independent and professional boards, improve accountability through business plans and enhance performance monitoring. The Finance Division said the reform programme is intended to improve commercial discipline and transparency while reducing fiscal risks linked to underperforming state-owned entities.
The Finance Division acknowledged that challenges remain within parts of the SOE portfolio and said individual entities are being addressed according to their circumstances. Measures include restructuring, closure, privatisation and enhanced performance management. The government’s approach is therefore focused not only on the financial flows between SOEs and the state but also on structural changes intended to improve the overall management and financial sustainability of public-sector enterprises.
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