KARACHI: Borrowing by public-sector enterprises (PSEs) jumped 10 times in the first nine months of 2016-17 on a year-on-year basis, indicating that PSEs now heavily depend on loans from commercial banks.

The government has failed to get rid of loss-making PSEs. Its privatisation policy has remained under attack on political grounds by opposition parties.

The State Bank of Pakistan (SBP) reported that PSEs borrowed Rs128.5 billion in July-March, which is record high. It raises concerns because these enterprises are unable to pay back borrowed money. Analysts believe that taxpayers’ money will ultimately be used to pay the huge debt that will further widen the fiscal gap.

In July-March of 2015-16, borrowing for PSEs was limited to Rs13.2bn. But it accelerated later on and reached Rs109bn by the end of the fiscal year. This was higher than the borrowing recorded in the preceding fiscal year.

However, borrowing for PSEs in 2016-17 has already surpassed the amount borrowed in the last two years and can end up in the range of Rs170-200bn. Total borrowing for PSEs at the end of June 2016 was Rs568bn.

The government could not muster support from political stakeholders to offload loss-making PSEs like Pakistan Steel and PIA.

The two entities have been losing billions each month amid little hope for privatisation.

The government, which is struggling to bring down the fiscal deficit to 4.1 per cent of gross domestic product (GDP), can find fiscal space with the help of privatisation proceeds. The SBP’s half year report on the economy indicates that interest payments on domestic debt have been increasing at an alarming rate while consuming a large share out of government revenues.

Another report by the SBP said the debt and liabilities of PSEs at the end of the second quarter of 2016-17 reached Rs833bn, showing year-on-year growth of 25pc. Total debt and liabilities stood at 2.5pc of GDP.

PIA owed Rs103bn at the end of December 2016 while the figure for Pakistan Steel and Water and Power Development Authority was Rs43bn and Rs61bn, respectively.

Published in Dawn, April 7th, 2017