SOEs’ fiscal contribution plunges 91%

ISLAMABAD: The financial position of Pakistan’s state-owned enterprises (SOEs) weakened further during the first half of fiscal year 2025-26, with government support rising sharply while the entities’ contributions to the national exchequer declined.

Official data showed that the government provided Rs804 billion in financial support to SOEs between July and December 2025. The amount was Rs616 billion during the same period a year earlier, marking an increase of Rs188 billion, or 31%.

At the same time, SOE contributions to the government fell by 20% to Rs839 billion. The contribution stood at Rs1.043 trillion in the corresponding period of FY2024-25.

As a result, the net fiscal flow from SOEs to the government dropped by 91%. It declined from Rs427 billion in the first half of FY2024-25 to only Rs35 billion during July-December 2025.

The figures were presented before the Cabinet Committee on State-Owned Enterprises (CCoSOEs), chaired by Finance Minister Muhammad Aurangzeb.

According to the Finance Ministry, profitable state-owned companies earned a combined profit of Rs423.3 billion during the six-month period. However, their profits declined by Rs33.7 billion, or 7.3%, compared with the previous year. The ministry attributed the decline mainly to lower international oil prices.

Meanwhile, loss-making SOEs recorded combined losses of Rs342.8 billion, showing no improvement from the corresponding period a year earlier.

The data indicates that the government continues to face significant fiscal pressure from state-owned entities. Higher financial support and declining returns have substantially reduced their overall positive contribution to the government.

The committee highlighted several areas requiring attention, including circular debt, fiscal risks, operational problems in the power and infrastructure sectors, weak corporate governance and the need to improve the performance of boards.

It also stressed the implementation of approved business plans, measurable performance targets, greater operational efficiency and timely corrective measures for underperforming enterprises.

The committee approved amendments concerning the implementation and monitoring of International Financial Reporting Standards (IFRS) by SOEs. Under the revised framework, financial reporting standards notified by the Securities and Exchange Commission of Pakistan, including applicable modifications or exemptions, will apply to SOEs. For entities regulated by the State Bank of Pakistan, the SBP-prescribed reporting framework will take precedence.

The proposed changes have raised concerns within the Finance Ministry. The Central Monitoring Unit reportedly opposed exemptions for certain energy-sector companies, warning that relaxed reporting requirements could reduce transparency and conceal fiscal risks.

The unit maintained that exemptions from IFRS 9 and IFRS 14 could undermine the reform objectives of the SOEs Act, 2023. It stressed that regulatory accounting balances, tariff differences and recoverable amounts should be clearly reflected in financial statements.

The latest figures underline the continuing challenges faced by the government in reforming loss-making state enterprises and reducing their reliance on public funds.