EDITORIAL: The public debate on Pakistan’s state-owned enterprises (SOEs) has long fixated over chronic loss-makers and the fiscal sinkholes they represent. That focus, while justified, risks obscuring a relatively quieter but equally damaging failure: the steady erosion of profitability in SOEs that still make money.
As reported by local media, a recent report by the finance ministry, prepared by its Central Monitoring Unit and still awaiting federal cabinet ratification, has revealed that among the top 15 government-owned entities, combined profits fell to Rs622 billion in FY2024-25, a five percent or Rs30 billion decline from the previous year.
The headline here is not just weaker numbers; it is what sits behind them.
The report points to moribund governance structures where boards of directors are incomplete, template-driven, lack accountability and with no meaningful assessment of board effectiveness, oversight quality or decision-making performance. In other words, even profitable SOEs are being managed into decline by the absence of effective, competent governance.
What this says about the government’s much-touted reform agenda is deeply unsettling, particularly when the finance ministry itself acknowledges the entrenched practice of packing boards of directors with loyalists and favoured individuals.
During the first full fiscal year of Prime Minister Shehbaz Sharif’s government, policymakers not only failed to undertake the harder, structural reforms, they could not even uphold the PM’s own initial directive, requiring bureaucrats serving on multiple boards to retain no more than Rs1 million in board fees and surrender any excess to the public exchequer.
READ MORE: State-Owned Enterprises incur Rs122.9bn net losses in 2024-25
Even this minimal measure of discipline was not implemented. Instead, sustained bureaucratic resistance ultimately forced the PM to withdraw the directive altogether, clearly demonstrating how weak political resolve and entrenched bureaucratic power continue to trump reform commitments.
Furthermore, the report highlights that while boards nominally comprise 50 percent independent directors, audit and risk committees lack real autonomy and management is rarely subjected to rigorous scrutiny across critical decisions.
Reporting of key performance indicators, board decisions and risk exposures is inconsistent at best, underscoring fragile accountability structures that leave stakeholders unable to properly assess performance or the entities’ true fiscal exposure.
More troubling still, fewer than 36 percent of SOEs have completed their audits, normalising delays across financial reporting cycles and forcing major decisions to be taken on provisional numbers. This reliance on estimates to guide choices with potentially far-reaching consequences is deeply alarming, as it not only distorts decision-making but also undermines valuation credibility, amplifying fiscal and contingent liability risks.
The toll of this governance decay is visible in the numbers. In FY2024-25, only one SOE — Oil and Gas Development Company Limited — crossed the Rs100 billion profit mark, earning Rs170 billion, although even this represented a sharp 19 percent year-on-year decline in profitability.
Pakistan Petroleum Limited followed with Rs90 billion in profits, also down 22 percent. Just three entities earned more than Rs50 billion and only 14 SOEs reported profits exceeding Rs10 billion.
The National Bank of Pakistan, the third-highest public sector performer at Rs57 billion, was among the few to register an improvement. By contrast, profitability in the oil and gas sector fell by nearly one-fourth to Rs366 billion, a drop the finance ministry attributes to receivables locked up in circular debt, compounded by persistent governance failures.
One cannot help but ponder whether even this reduced level of profitability is sustainable in a genuinely competitive environment, given that many state-run entities continue to benefit from preferential access to government contracts.
Unless the authorities’ reform rhetoric is translated into concrete, enforceable changes — strengthening boards, enforcing accountability and ensuring transparency — these profits will remain fragile, and the promise of a modern, efficient public sector will remain just that: a promise.
Copyright Business Recorder, 2026
Comments