Pakistan's State-Owned Enterprises: Accumulated Losses Reach Rs7.22 Trillion, Rs804 Billion Support on Taxpayers

In December 2026, Pakistan's Finance Division Central Monitoring Unit (CMU) published the accounts for the six months ended December 2026. The heaviest line in the report is simple: accumulated losses of state-owned enterprises (SOEs) stand at Rs7.22 trillion, up 22 percent from Rs5.89 trillion a year earlier. Over the same period, government support rose to Rs804 billion, an increase of 31 percent. The flow of losses remained almost unchanged, yet the mountain of liabilities kept rising — that contradiction is the central theme of this report. The CMU's bi-annual report covers the first half of fiscal year 2026-26, that is, July to December 2026. Its scope includes the National Highway Authority (NHA), Pakistan International Airlines Holding Company, Pakistan Railways, the power distribution companies (DISCOs), independent power producers (IPPs), GENCOs and the regulator NEPRA. Because the report is a primary official document, the figures carry high reliability. The nature of this sector is that these entities are, on one hand, state assets and, on the other, state liabilities. Unless both faces of the account are read together, the picture remains incomplete. Let us first look at the heavier side of the scale. In this half-year, the aggregate losses of the SOEs were Rs342.8 billion, almost equal to Rs342.9 billion in the same period a year earlier. The flow is stable, but the stock is growing — accumulated losses rose 22 percent. Behind this lie interest and quasi-fiscal obligations. Total SOE debt rose to Rs10.1 trillion, accrued interest to Rs2.18 trillion (up 9 percent), and unfunded pension liabilities to Rs1.98 trillion (up 11 percent). Total equity fell 3 percent to Rs6.41 trillion. The debt composition is also worrying — foreign re-lent loans Rs2.58 trillion, bank borrowings Rs3.10 trillion, and cash development loans Rs2.10 trillion. The structure of government support is even more telling. Of the Rs804 billion, equity injections were Rs224.6 billion, up 190 percent in a year. Government loans were Rs164.8 billion (up 79 percent), subsidies Rs332.2 billion (broadly stable), and grants Rs82.3 billion (down 27 percent). Equity injection is the most expensive and most permanent form of support; this surge suggests the government is firefighting rather than changing the structure. The circular-debt account is the most complex here. On an IFRS basis, circular debt in the power and gas sectors is Rs3.38 trillion; but on a gross basis it is about Rs4.9 trillion. This includes Rs1.1 trillion in IPP and GENCO payables, Rs694 billion in circular-debt restructuring, Rs2.0 trillion in gas-sector payables, and Rs1.1 trillion in late payment surcharges. The late payment surcharge is effectively a compounding penalty over time; as a result, the true economic cost is far higher than the headline figure. Now the question of efficiency. The operating cost recovery ratio of the loss-making entities is only 0.84 — that is, for every Rs100 spent they recover Rs84. The profit-making entities are also worsening; their aggregate profit was Rs423.3 billion (down 7 percent) and net adjusted profit Rs80.5 billion (down 30 percent). Return on equity is just 1.25 percent, asset turnover 32 percent, and leverage more than six times. This is a value-destructive, shock-prone capital structure. The concentration of losses is also clear. The National Highway Authority alone posted a first-half loss of Rs124.7 billion and accumulated losses of Rs2.17 trillion. Beside it stands Pakistan Railways, which receives Rs60 billion a year in operating grants and whose pension liabilities are only partially recognised, outside actuarial funding. The technical losses of the DISCOs exceed NEPRA's benchmarks, and Pakistan International Airlines Holding is a structural burden. In other words, improving the aggregate picture is mathematically hostage to a handful of these entities. Seen from the angle of policy and governance, the situation becomes clearer still. Pakistan's macro-fiscal framework and the conditions of the International Monetary Fund programme together oversee reform of the SOE sector. An operating cost recovery ratio below one, an unmet commitment to reduce circular debt, and pension liabilities kept outside actuarial funding — these three together paint a picture of a governance gap. The phrase quasi-fiscal obligation used in the report signals that some liabilities sit outside institutional accounts. As a result, headline debt-to-GDP-type metrics can make the crisis look smaller than it really is. The report's most contested claim is that the sector is approaching breakeven. Technically this is true, because the fiscal efficiency index has fallen from 1.64 to 1.04. But the story hidden beneath is different. The gap between government support and the SOEs' contributions to the government — the net fiscal flow — has fallen from Rs427 billion to Rs35.8 billion, a contraction of about 92 percent. The SOEs' total contributions to the government also fell 19 percent, to Rs839 billion. In fiscal year 2026, of the Rs7,065 billion in federal tax revenue, Rs804 billion — that is, one rupee in every nine — went back to the SOEs. The most striking fact is that even after equity injections rose 190 percent, circular debt still rose by Rs143 billion in the same six months. In other words, the problem is not liquidity but operations. Dividends rose 26 percent and taxes 10 percent, but overall contributions fell — a negative feedback loop in which the sector takes more and returns less each period. The question is whether this support is a solution to the crisis or a postponement of it. The shock from this sector reaches citizens directly. The SOEs' large debts, unfunded pensions and circular debt together raise the burden of sovereign borrowing, which ultimately falls on ordinary households through tariffs and taxes. Through circular debt, the interlinkages created in the power sector among IPPs, GENCOs and the gas sector raise the system-wide cost. At the same time, private-sector credit also becomes constrained, because the state's borrowing demand absorbs resources. The CMU's own warning is clear: if this trend continues, the SOE sector may become a net fiscal consumer. If the fiscal efficiency index falls below 1.0 in the next bi-annual report, that will be the clearest signal. The discussion then should not be about dividends or subsidies, but about reducing technical losses and recovering costs. To know the true picture of Pakistan's fiscal accounts, the most urgent task now is the full publication of the report's incomplete asset list.