Islamabad June 24 2024: Federal SOEs gross revenues reached PKR 11,922 billion in FY 2023, a 15% increase from the previous year, primarily driven by inflationary pressures, with the Oil & Financial sectors leading this growth, according to the report published by Ministry of Finance.
Total aggregate profits were PKR 703 billion, while loss-making SOEs reported an aggregate loss of PKR 905 billion, up 23% from last year. This resulted in aggregate net losses of PKR 202 billion, reflecting a 25% increase from the previous year. The book value of assets reached PKR 35,218 billion, up 16%, while liabilities also increased to PKR 29,721 billion, up 20% indicating higher financial leverage. Consequently, net equity stood at PKR 5,496 billion, down 2.55%. Overall portfolio volatility remains of a significant concern for Federal Government with Value at Risk on the higher range.
The Power sector, particularly on the DISCO side, continued to be dominated by loss-making entities. Aggregate losses on power side totalled PKR 304 Billion despite the fact that PKR 759 Billion was spent supporting this sector. Additionally, the infrastructure sector, with high financial costs for entities like NHAs, exacerbated the loss-making scenario. Railways also continued to contribute to the rising losses. Aggregate losses of these entities for the past 10 years totalled PKR 5,595 Billion.
The Government of Pakistan provided aggregate support of PKR 1,021 billion in the form of Equity Injections PKR 267 Billion , Grants PKR 223 Billion, Subsidies PKR 403 Billion, and Loans PKR 128 Billion to sustain these SOEs and support the economy. However, this support represented more than 10% of the federal budget’s receipts, indicating significant fiscal strain. Various risks were identified within the SOE sector, notably the substantial working capital lock-up due to aged receivables and payables throughout the SOE chain, leading to a circular debt exceeding PKR 4 trillion. Additionally, operational inefficiencies in the power sector continued to negatively impact SOE profitability with spill over effects all across the chain.
Guarantees provided stood at PKR 1,656 billion, while the debt stock reached PKR 3,545 billion, with accrued interest on NHA loans alone contributing more than PKR 1,100 billion. This substantial level of debt and guarantees issued create significant risks for the sector, exposing it to both systemic and unsystemic risks. Systemic risks, such as economic downturns, inflation, and interest rate fluctuations, can exacerbate financial strain on SOEs, making debt servicing more challenging which can be clearly seen in the SOE portfolio. Unsystemic risks, including operational inefficiencies, can further impact individual entities’ financial stability are also visible. The high guarantees and debt levels also place additional pressure on government finances, as it may need to cover liabilities if SOEs fail to meet their obligations, leading to further fiscal strain.
These SOEs contributed to the national exchequer in the form of taxes amounting to PKR 466 billion, a 24% increase. Non-tax revenues, including sales taxes, royalties, and levies collected, amounted to PKR 952 billion, up 58%. Dividends contributed PKR 63 billion, marking a 43% increase.
