Public Sector Enterprises (PSEs) obtained some Rs 153 billion fresh borrowing during the first 10 months (July-April) of this fiscal year (FY18). According to the State Bank of Pakistan, credit offtake by PSEs posted 19 percent growth during the first 10 months of current fiscal year. Overall, stocks of PSE borrowing reached Rs 976 billion at the end of April 2018 compared to Rs 822.797 billion in June 2017, depicting an increase of Rs 153.163 billion.
However, the cumulative credit offtake by PSEs remained on the lower side during this fiscal year as compared with the offtake during the same period of last fiscal year (FY17), mainly due to a major one-off retirement by PSO. PSEs borrowed Rs 208.7 billion in July-April of FY17.
According to the State Bank, PSEs have been borrowing quite aggressively over the past couple of years, during which the stock of PSE credit has almost doubled. Similar to the past couple of years, the bulk of PSEs borrowings were associated with energy-related entities. In addition to infrastructure spending, rising volume of circular debt in the energy sector also explains the continued expansion in PSE credit. The size of PSE debt and liabilities as percent of GDP stood at some 3 percent.
Sui Southern Gas Company Limited is in the process of building an LNG pipeline from Karachi to Lahore as part of the third regasification (RLNG III) project. The project has an estimated cost of Rs 64.9 billion, which the corporation is mobilizing from domestic banks against government guarantees.
In addition to these, the oil sector also increased its borrowings from domestic banks. Parco took a dollar-denominated loan to settle its oil L/C, and PSO borrowed again from banks to compensate for growing receivables from its major consumers. Most of the enterprises already have a sizable amount of funds available as deposits with commercial banks. If utilized efficiently, these would significantly reduce the additional burden of financing cost.
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