Public-sector enterprises (PSEs) continue to borrow from the commercial banks as all attempts by the government to privatise loss-making PSEs continues to be criticised on political grounds. During the first nine months of 2016-17, PSE borrowing increased ten times on a year-on-year basis.
According to State Bank of Pakistan (SBP), PSEs borrowed a record high of Rs128.5b in July-March. The matter has raised concerns as PSEs are unlikely to be able to pay back the debt. Analysts fear that taxes will eventually have to be used to finance the debt payments which will further widen the fiscal deficit.
In July-March 2015-16, PSEs borrowing amounted to Rs13.2b which reached Rs109b by the end of the fiscal year. This was higher than the borrowing recorded in the previous fiscal year.
However, borrowing for PSEs in 2016-17 has already reached a higher amount than the amount borrowed in the last two years and is expected to reach Rs170-200b by year end. Total borrowing for PSEs at the end of June 2016 was Rs568b.
All attempts to privatise Pakistan Steel Mills (PSM) and Pakistan International Airlines (PIA) have failed as a result of political opposition and the two entities continue to be losing billions each month with little hope of recovery.
The government, in its efforts to contain the fiscal deficit to 4.1 pc of gross domestic product (GDP), can utilise funds from privatisation can allow some fiscal space for the government. According to SBP’s semi-annual report, interest payments on domestic debt consume a substantial share of government revenues.
Another report by SBP indicates total outstanding debt and liabilities of PSEs of Rs833bn at the end of the second quarter of 2016-17 growing 25pc year-on-year. Total debt and liabilities clocked in at 2.5pc of GDP.
PIA’s outstanding liabilities amounted to Rs103b at the end of December 2016 while that of Pakistan Steel stood at Rs 43b and Water and Power Development Authority at Rs 61b.
