Govt confronts escalating debts, liabilities of Rs2,333bn in PSEs

The government is facing a substantial increase in the debts and liabilities of Public Sector Enterprises (PSEs), signaling a need for larger budget allocations for repayments.

Despite ongoing efforts by successive governments to address the issue and pressures from the IMF to privatize these loss-making entities, progress remains elusive.

Data from the State Bank of Pakistan reveals a notable 24.1% year-on-year surge in the debts and liabilities of PSEs, reaching Rs2,332.9 billion in September.

In Fiscal Year 2023, these enterprises experienced a significant 32.7% increase, amounting to Rs573.6 billion, compared to the previous year. In contrast, the growth in debts and liabilities was 6.5% in Fiscal Year 2022. Notable loss-making PSEs include PIA, Wapda, and others.

The first quarter of Fiscal Year 2024 witnessed a relatively modest increase of Rs4.8 billion in PSE debts, indicating the government’s attention to the escalating burden. Despite efforts by the caretaker government, privatization of loss-making entities has proven challenging, and no entities have been successfully privatized thus far.

As of June 2022, PSE debt stood at Rs1,393.4 billion, increasing to Rs1,687.2 billion by June 2023 and slightly edging up to Rs1,698.1 billion in September.

Liabilities also rose to Rs640.9 billion in June 2023 from Rs361.1 billion in the same month the previous year. However, liabilities decreased by Rs6.2 billion in the first quarter of Fiscal Year 2024, totaling Rs634.7 billion.

Notably, debts and liabilities until June accounted for 2.7% of the gross domestic product (GDP).

The three primary loss-making entities are PIA with debts and liabilities of Rs180.6 billion as of September 2023, followed by Wapda at Rs92.6 billion and Pakistan Steel Mills at Rs40.3 billion.

Despite significant increases in debts and liabilities for other undisclosed loss-making PSEs, the government’s strategy remains unclear.

While attempts are being made to sell some PSEs, analysts suggest a lack of investor attraction to loss-making entities.