ISLAMABAD: The aggregate profitability of the state-owned entities (SOEs) contracted by 30 per cent in the first half of FY26 as their overall performance deteriorated across seven core areas, increasing fiscal and material macroeconomic risks to the sovereign state of Pakistan.
According to the July-December 2025 SOEs Monitoring Report, released on Monday by the Ministry of Finance, the power sector remains the weakest performer, but the aggregate loss profile of loss-making SOEs is estimated at about Rs2.8 billion per day, while fiscal support through subsidies, grants, loans, and equity injections has reached nearly Rs6.6bn per day. Power sector circular debt increased by Rs374bn, driven by inefficiencies and poor recoveries.
This is “equivalent to approximately 11pc of total federal budgetary receipts (on the six-month period)”, the MoF deplored, adding that “this persistent fiscal burden continues to crowd out developmental expenditure, compress fiscal flexibility, and weaken sovereign fiscal buffers”.
The broader SOE balance sheet also remains highly leveraged, with debt exposures exceeding Rs10tr, including about Rs2.5tr in foreign currency-denominated liabilities or Foreign Relent Loans (FRLs), exposing the sovereign to elevated exchange rate pass-through risk, refinancing pressure, imported sensitivity, and external account volatility.
Earnings fall 30pc as all performance indicators deteriorate
Collectively, these risks indicate that Pakistan’s SOE sector is no longer merely a governance challenge, but a high-impact sovereign balance sheet vulnerability with direct implications for fiscal sustainability, sovereign creditworthiness, debt dynamics, external financing dependence, and long-term macroeconomic stability.
In the first core area of aggregate profitability and losses, the report noted that the situation deteriorated. “During the first half of FY26 (July-December 2025), the SOEs experienced a mild contraction in financial performance. Aggregate profits declined by 7pc, dropping from Rs457.2bn in HY2025 to Rs423.3bn in HY2026”. On the loss front, cumulative losses across SOEs remained broadly stable, edging down marginally from Rs342.9bn in HY2025 to Rs342.8bn in HY2026.
“Combined, these movements resulted in a net adjusted profit of Rs80.5bn for HY2026, representing a 30pc contraction from the Rs114.3bn net aggregate profit recorded in HY2025”, the Central Monitoring Unit (CMU) of the MoF said.
Despite a marginal consolidated profit, the report said the narrowing spread between profits and losses signalled rising fiscal and operational pressures within the federal SOE portfolio. On the second parameter of the aggregate balance sheet, the report noted a modest contraction across key financial indicators. Total equity declined by 3pc, falling from Rs6.629tr in HY2025 to Rs6.407tr in HY2026. Liabilities also edged lower, down 1pc from Rs31.092tr to Rs30.7tr.
As a result, total assets contracted by 2pc, declining from Rs37.721tr in HY2025 to Rs37.107tr in HY2026, underscoring a modest weakening in the overall financial position of the SOE sector.
“However, the reduction in equity alongside elevated leverage levels continues to expose the portfolio to heightened fiscal and refinancing risk, particularly in capital-intensive sectors such as power, infrastructure, and transport”.
The dominance of a handful of SOEs in driving aggregate profitability highlights a material concentration risk within the federal portfolio. A substantial portion of overall earnings remains dependent upon the Oil & Gas and financial sectors, thereby exposing the broader SOE ecosystem to commodity price volatility, exchange-rate movements, regulatory adjustments, and macroeconomic cyclicality.
Published in Dawn, October 6th, 2026
