Pakistan's State-Owned Enterprises: Rs7.22 Trillion in Accumulated Losses as Net Fiscal Flow Collapses 92% in a Year

The most striking figure in the half-yearly accounts of Pakistan's state-owned enterprise (SOE) sector is not a single profit or loss number, but a gap. According to the H1-FY2026 report published by the Central Monitoring Unit (CMU) under the Finance Division, across the six months from July to December 2026 the net difference between what SOEs returned to the government and what the government gave them fell to just Rs35.8 billion. A year earlier the same figure stood at Rs427 billion. In one year, the net fiscal flow contracted by roughly 92 percent. That single ratio captures the true relationship between Pakistan's treasury and its state enterprises. The sector was once a source of revenue; now the question is whether it has itself become a cause of debt. The report is not private research. The Central Monitoring Unit under Pakistan's Finance Division publishes half-yearly accounts of SOEs' operating income and expenditure, debt, subsidies, pension liabilities and capital provision. H1-FY2026 means the first six months of the 2026-26 fiscal year, from July to December 2026. The core message is that state enterprises risk gradually becoming net fiscal consumers. The National Highway Authority (NHA), Pakistan International Airlines (PIA) Holding Company, Pakistan Railways and the power distribution companies (DISCOs) form the main part of this sector. The report must be read against three frameworks: IMF-programme fiscal-consolidation conditions, the commitment to reduce power-sector circular debt, and the operating cost recovery ratio (OCRR) benchmarks for state enterprises. At first glance, the flow of losses looks stable, but the stock of liabilities is growing. In the first six months of the current fiscal year, the aggregate loss of state enterprises was Rs342.8 billion, almost equal to Rs342.9 billion in the same period a year earlier. But accumulated losses climbed to Rs7.22 trillion, 22 percent higher than Rs5.89 trillion a year ago. In other words, new losses accrue at roughly the same pace, while interest and quasi-fiscal obligations make the pile of old losses balloon rapidly. The picture on government support is even clearer. In the first half of the current fiscal year, the government poured Rs804 billion into state enterprises, 31 percent more than Rs616 billion a year earlier. Within that, equity injections were Rs224.6 billion — a 190 percent rise in one year. Government loans were Rs164.8 billion, up 79 percent. Subsidies were Rs332.2 billion, broadly unchanged. Grants were Rs82.3 billion, down 27 percent. Meanwhile, the profit-making enterprises are also deteriorating. Their aggregate profit was Rs423.3 billion, down 7 percent. Net adjusted profit was Rs80.5 billion, down 30 percent. Their contribution to the government was Rs839 billion, down 19 percent. All told, out of Rs7,065 billion in federal tax revenue in 2026, Rs804 billion flowed back to state enterprises — one rupee in every nine. That figure is a simple measure of how much the SOE burden lands on the ordinary household budget. The debt side is heavier still. Total SOE debt (excluding guarantees) is Rs10.1 trillion, up 14 percent. Within that, accrued interest is Rs2.18 trillion, up 9 percent. Unfunded pension liabilities are Rs1.98 trillion, up 11 percent. Total equity is Rs6.41 trillion, down 3 percent. The debt composition includes Rs2.58 trillion in foreign re-lent loans, Rs3.10 trillion in bank borrowings and Rs2.10 trillion in cash development loans. Power and gas sector circular debt is Rs3.38 trillion on an IFRS basis, but on a gross basis it is roughly Rs4.9 trillion. Within that, IPP and GENCO payables are Rs1.1 trillion, restructuring-facility drawdowns Rs694 billion, gas-sector payables Rs2.0 trillion and the Late Payment Surcharge (LPS) Rs1.1 trillion. This is where the most important signal hides. In the current six months, equity injections rose 190 percent, largely to settle circular debt, yet circular debt rose Rs143 billion in the same period. In other words, the effort to solve the problem by pouring in cash has failed. The efficiency indicators explain that failure. The operating cost recovery ratio (OCRR) of the loss-making enterprises edged up only from 0.83 to 0.84. That is, for every Rs100 spent they recover only Rs84 in operating revenue. For profit-making enterprises the ratio fell from 1.11 to 1.10. The whole sector's Fiscal Efficiency Index fell from 1.64 to 1.04. A reading of 1.0x is the breakeven point; 1.04x means that for every rupee the government gives, only slightly more than a rupee comes back. Return on equity is just 1.25 percent, asset turnover is 32 percent on an annualised basis, and leverage exceeds six times. This structure is value-destructive and shock-prone. The concentration of losses is also notable. The National Highway Authority alone posted the largest loss — Rs124.7 billion in the current six months, with accumulated losses of Rs2.17 trillion. PIA, Pakistan Railways and the DISCOs follow. Pakistan Railways receives about Rs60 billion a year in operating grants, and its pension liabilities are partly unrecognised and outside actuarial funding. The technical losses of the DISCOs exceed NEPRA benchmarks. In short, the improvement of the whole sector depends on the fortunes of a handful of entities. The conventional reading of the report is that Pakistan's SOE sector has arrived near its breakeven point — and in some cases a Fiscal Efficiency Index of 1.04x is seen as a comforting sign. That outside reading is mistaken. The index fell from 1.64x to 1.04x in a year; a shrinking distance from the breakeven line does not mean improvement, but the speed of decline. The real picture is that the flow (the rate of loss) is roughly stable while the stock of liabilities grows fast. Interest is rising, pensions are accruing, equity is falling — a negative feedback loop in which the sector consumes more and returns less each period. A second misconception is that a large equity injection means the government is on the path to solving the problem. In reality equity is the most expensive and most permanent form of support, and even after a 190 percent increase, circular debt rose. That means the problem is not one of liquidity but of operations. Without reducing technical losses and collection shortfalls, cash infusions only buy time. Moreover, a large part of pension and quasi-fiscal liabilities sits off the primary accounts, so the declared fiscal position understates the true pressure. Three numbers must be watched in the next half-yearly report. First, whether the Fiscal Efficiency Index falls below 1.0x — if it does, the sector's transition into a net fiscal consumer is confirmed. Second, whether circular debt falls despite the injections — if it does not, it will be clear that reform must be about operations, not just cash. Third, whether the OCRR moves toward 1.0. The direction of this single indicator will tell whether Pakistan's SOE sector is walking toward standing on its own feet, or toward a deeper debt trap.