Charging higher taxes from non-filers of income tax returns has become a source of easy revenue generation, rather than expanding the tax base. photo: file
ISLAMABAD:
The financial health of state-owned entities (SOEs) further deteriorated in the first full fiscal year of the government of Prime Minister Shehbaz Sharif, as their net losses increased by 300% and these firms received Rs2.1 trillion in annual fiscal support, according to results announced by the Ministry of Finance on Friday.
The combined revenues of state-owned firms also decreased by Rs1.4 trillion to Rs12.4 trillion in the fiscal year 2024-25, which ended in June last year.
According to the press statement, there “was an overall net loss of Rs122.9 billion for the SOE sector, compared to a net loss of Rs30.6 billion in the previous year”. This translates into a 300% jump within one year, instead of showing any improvement in financial performance.
PM Sharif assumed office for a second term as prime minister in April 2024, but his government’s first full fiscal year began in July 2024 and ended in June 2025.
These results were shared at a meeting of the Cabinet Committee on State-Owned Enterprises (CCoSOEs), which was held under the chairmanship of Finance Minister Muhammad Aurangzeb.
The Cabinet Committee was presented with the Annual Consolidated Performance Report of Commercial and Non-Commercial State-Owned Enterprises (SOEs) for FY2024-25, prepared by the Central Monitoring Unit (CMU) of the Finance Division, according to the statement.
The Committee was informed that during FY 2024-25, aggregate revenues of SOEs stood at Rs12.4 trillion – a reduction of Rs1.4 trillion, or over 10%, compared to the previous year.
The Ministry of Finance said the lower revenues reflected a decline largely attributable to reduced profitability in the oil sector following a decline in international oil prices.
Aggregate profits of profit-making SOEs also declined by 13% to Rs710 billion, compared to Rs821 billion last year, it added.
The aggregate losses of loss-making SOEs marginally reduced to Rs833 billion. However, despite this, net losses for the overall SOE sector jumped by 300%.
The CMU briefed the Committee on the financial and non-financial performance of SOEs, government support and fiscal flows, contribution of SOEs to the exchequer, debt profile, corporate governance and compliance status, business plan assessments, and the proposed way forward under the SOEs Act, 2023.It was highlighted that losses remain heavily concentrated in a small number of entities, particularly in the transport and power distribution sectors. The National Highway Authority and several power distribution companies continued to be major loss contributors, reflecting structural issues, high depreciation and financing costs, as well as the public service nature of certain operations that are not commercially viable.
The government said it provided Rs2.1 trillion in fiscal support to these SOEs during FY2024-25, driven mainly by higher equity injections to clear the circular debt stock, while subsidies showed a modest decline.
In the preceding fiscal year, the government had provided Rs1.5 trillion in fiscal support. Within one year, there was an increase of over 37% in fiscal support, some of which has not yet been booked in the budget.
The Ministry of Finance said inflows from SOEs to the government increased to Rs2.1 trillion, supported by higher dividends, tax receipts and interest income on government lending.
According to the statement, the total debt and contingent liabilities of these entities rose to Rs11.7 trillion by the end of the last fiscal year. This included Rs9.6 trillion comprising cash development loans, foreign re-lent loans, bank borrowings and accrued interest. Guarantees and other off-balance-sheet contingencies were reported at Rs2.2 trillion.
The Committee was also briefed on the quantification of unfunded pension liabilities across SOEs, estimated at around Rs2 trillion, which was identified as a major legacy risk requiring policy attention.
The finance minister said the presentation reflected meaningful progress in oversight, disclosure and risk identification, particularly in areas of fiscal flows, debt mapping and unfunded pension liabilities.
Committee members stressed the need for enforcement of audit completion in compliance with the SOEs Act, 2023, and a timely transition to IFRS-based reporting by February 2026.
The SOEs Act mandates that all SOEs prepare their financial statements in accordance with IFRS, with full compliance required by February 2026. This transition is critical for enhancing financial governance and fostering investor confidence.
Key IFRS and IAS standards affecting SOEs include IFRS 9 for financial instruments, which applies to sectors like financial services, insurance, oil and gas, and power.
The IFRS 14, which addresses regulatory deferral accounts in the power and gas sectors; IFRS 15 for revenue recognition, particularly relevant to long-term contracts in oil & gas, power, and telecommunications; and IFRS 16, which requires the recognition of lease liabilities, affecting transport, infrastructure, gas, and power sectors with Power Purchase Agreements (PPAs).
In addition, IFRS 17 for insurance contracts and IAS standards such as IAS 19 on employee benefits, IAS 20 on government assistance, and IAS 21 on foreign exchange impacts were highlighted as critical for several sectors such as infrastructure, export-oriented industries, and companies with significant foreign currency exposure.
Adopting these standards will require SOEs to navigate complex operational and financial adjustments to meet both local regulations and international benchmarks.
The Cabinet Committee directed that the findings of the report be shared with relevant ministries to inform reform measures and that progress on audits, governance reforms, debt rationalisation and fiscal risk containment be reviewed regularly.
The Committee approved the submission of the Annual Consolidated Performance Report for publication.
