BURDENED by chronic losses and rising debt, Pakistan’s SOEs have for years drained public funds that could have been spent on sectors such as healthcare and education. Frequent equity injections, subsidies, loans and sovereign guarantees reduced the pressure on these entities to fix their inefficiencies. Instead of reform, the outcome has been a growing pile of liabilities. Successive governments promised to restructure, privatise or improve the governance of these enterprises. Under various IMF programmes — including the current one — Islamabad pledged greater transparency, regular performance audits and the appointment of professional independent boards. But follow-through has been weak. Reforms are announced with fanfare, yet implementation rarely matches the rhetoric. Poor political will, coupled with resistance from vested interests, continues to stall meaningful change, adding to the burden of taxpayers.

This is what the Central Monitoring Unit’s latest stocktake of SOEs for the past fiscal year has highlighted once again. Government support to these entities jumped 37pc to Rs2.079tr, driven mainly by Rs729bn in fresh equity injections and an expansion in official lending. Even though direct grants and subsidies have declined, the overall financial burden on the exchequer continues to grow. Total SOE liabilities have climbed to Rs9.571tr, roughly half the annual federal budget. Unfunded pension obligations alone stand at Rs2.03tr. Meanwhile, the circular debt remains stuck at around Rs1.9tr despite repeated capital injections. The form of support may have changed, but the underlying structural strain remains intact. The opportunity cost is enormous. Out of Rs12.97tr collected in taxes, about Rs2.1tr — nearly one in every six rupees — was redirected towards SOEs to keep them afloat. In effect, public revenue is being recycled to sustain entities that together posted a net adjusted loss of Rs122.9bn last year.

The deep-rooted problems of the public sector are most visible in the crumbling power sector. It is the least liquid and most heavily indebted segment of the state system, reflecting a broader failure of governance. The CMU assessment is particularly striking because the power sector has received the largest share of government equity injections and fiscal support. With mounting losses and negative equity, the sector leadership appears unable to run it as a viable commercial enterprise. The CMU’s recommendations — stronger boards, timely audits, better disclosure and performance-based accountability — are not new. What makes this report stand out is its blunt conclusion that the crisis is not just about financial losses but also the absence of strategic direction. Without fundamental restructuring, disciplined capital allocation and a shift from merely keeping entities afloat to making them efficient, SOEs cannot function as sustainable businesses.

Published in Dawn, February 16th, 2026