KARACHI: The loss-making public sector enterprises have been borrowing heavily from the banks as the borrowing reached Rs115.46 billion in the first five months of this fiscal year against just Rs2.58bn in the same period of last year.

The PTI government had announced to reduce the losses of the PSEs but now has refused to privatise them.

The main contributors to the losses are Pakistan International Airlines, Pakistan Steel, Pakistan Railways and Water and Power Development Authority.

The PIA, Pak Steel and Railway collectively caused a loss of Rs705bn in the last three years. The latest data of the State Bank reveals borrowing of PSEs has been increasing faster than ever.

Last year, the PSEs borrowed Rs245.4bn from the banking system but the borrowing in the first half of the FY2018 was extremely low; the borrowing hit Rs2.58bn in 5 months, most of which was made in the second half of the fiscal.

However, the initial fast borrowing during the current fiscal year indicates the PSEs are going to set new records by the end of this fiscal. By the end of FY18, the total borrowing of the PSEs was Rs1,068.2bn compared to Rs822.5bn in FY17.

The present government is willing to revive the loss-making PSEs but so far no clear-cut plan has been revealed.

PIA and Pakistan Steel have been targeted to revive at the first stage while the railways minister claims improvement in the first 100 days by reducing losses. The previous minister also claimed the success story of the railways department but at the end of his 5 years, it was still a loss making entity.

The huge outflow of tax payers’ money to the PSEs has direct and negative impacts on the development funds which are reduced each year. The government allocates billions of rupees for these loss making PSEs to keep thousands of people employed.

In October, the International Monetary Fund (IMF) identified that the total losses of the three PSEs stood at 1.7 per cent of GDP in 2012-13.

However, it increased to 2.3pc of GDP in FY16. The IMF had suggested the government to complete the unfinished agenda of restructuring and privatising the loss-making PSEs.

The next meeting with the IMF is expected in January 2019 where the issue of privatisation could be discussed again.

Published in Dawn, December 15th, 2018