Pakistan’s public finances are under mounting pressure, and the latest FY2025 Aggregate Report on State-Owned Enterprises (SOEs) delivers a sobering message: for every Rs6 collected in taxes, Rs1 is being redirected to support loss-making SOEs. At a time when citizens are already grappling with inflation and higher taxation, this finding raises serious questions about efficiency, governance, and fiscal priorities.
A Sharp Deterioration in Performance
The numbers tell a worrying story. Net adjusted losses of SOEs surged from Rs30.6 billion in FY2024 to Rs122.9 billion in FY2025 — a fourfold increase in just one year. This dramatic jump signals deep structural weaknesses across key sectors, particularly energy and infrastructure.
While SOEs still contributed Rs2,119.2 billion to the national treasury in the form of taxes and dividends, the government’s actual net fiscal gain has nearly vanished. Once subsidies, loans, and equity injections are accounted for, the surplus plunged by 91%, falling from Rs458.2 billion to just Rs40.7 billion. In simple terms, the government is now barely breaking even on its investment in these enterprises.
Rising Guarantees, Rising Risk
Adding to the concern is a 52% surge in government guarantees, now standing at Rs2,164 billion. These sovereign-backed guarantees effectively transfer commercial risks onto the government’s balance sheet.
This means that if SOEs fail to meet their obligations, the burden ultimately falls on taxpayers. As fiscal space narrows, this risk reduces the government’s ability to invest in development projects, social welfare programs, and economic growth initiatives.
The IFRS Shift: A Moment of Financial Truth
By February 2026, SOEs must fully adopt International Financial Reporting Standards (IFRS). This transition is more than just an accounting change — it represents a shift toward transparency and financial realism.
Under IFRS 9’s Expected Credit Loss (ECL) model, assets such as circular debt receivables must be evaluated based on probable recovery, rather than assumed guarantees. For many energy and gas sector enterprises, this could significantly reduce reported profits and equity.
The era of deferring or masking losses is ending. The new reporting framework may expose deeper financial vulnerabilities that were previously understated.
Governance: The Core of the Crisis
Beyond the financial metrics lies a deeper governance issue. The report indicates that 86% of SOEs are critically non-compliant with the SOE Act 2023. Weak oversight, lack of independent and financially literate boards, and management-dominated decision-making have led to reactive “firefighting” rather than long-term strategic reform.
Without strong governance structures capable of understanding complex financial indicators — such as cost of capital and IFRS implications — meaningful reform will remain elusive.
Why This Matters for Taxpayers
Every rupee diverted to inefficient enterprises is a rupee not spent on healthcare, education, infrastructure, or poverty alleviation. When one-sixth of tax revenue is used to sustain underperforming entities, the opportunity cost becomes enormous.
For a country striving to stabilize its economy, meet international commitments, and restore investor confidence, the reform of SOEs is no longer optional — it is urgent.
The Road Ahead
The findings from FY2025 serve as a fiscal wake-up call. Strengthening corporate governance, ensuring transparency under IFRS, restructuring or privatizing chronically loss-making entities, and reducing reliance on sovereign guarantees must become policy priorities.
If addressed decisively, SOE reform could ease fiscal pressure and restore confidence in public financial management. If ignored, the burden on taxpayers — and the economy — will only grow heavier.