Finance ministry says Rs10.1trn SOE debt is not fresh bank borrowing

The Finance Division on Thursday rejected a media report on the debt of state-owned enterprises (SOEs), saying it compared two datasets that are not on a like-for-like basis and could create the incorrect impression that SOEs had taken on Rs1.3 trillion in new loans.

In a clarification issued in response to a report titled “SOEs’ debt soars to Rs10.1 trillion,” the ministry said the figure reported by the Central Monitoring Unit (CMU) of the Finance Division is the consolidated stock of interest-bearing obligations of federal SOEs, compiled for fiscal-risk monitoring. It is not a measure of fresh bank borrowing.

The State Bank of Pakistan (SBP) series cited in the report is a narrower measure covering only borrowing by public sector enterprises from the banking system, the ministry said.

According to the clarification, SBP data puts PSE bank debt at Rs2.954 trillion, while the CMU’s broader measure puts combined SOE debt at Rs10.1 trillion.

The ministry said the two datasets differ in scope, coverage and purpose and should not be mixed.

According to the breakdown shared by the Finance Division, the CMU-reported stock of about Rs10.1 trillion comprises:

- Cash Development Loans (CDLs): Rs2.098 trillion

- Foreign Re-lent Loans (FRLs): Rs2.581 trillion

- Bank/private loans: Rs3.102 trillion

- Accrued markup/rollover costs: Rs2.181 trillion

- Other interest-bearing obligations, including lease and right-of-use liabilities: Rs0.135 trillion

The ministry said bank and private loans account for only about Rs3.1 trillion of the total. The rest is mainly government lending, foreign re-lent loans, accrued markup, rollover costs and other interest-bearing liabilities. It said treating the entire CMU figure as comparable to the SBP banking-sector series was “methodologically incorrect.”

The Finance Division also addressed the rise in consolidated SOE debt from about Rs8.8 trillion to Rs10.1 trillion. It said this increase does not mean SOEs raised Rs1.3 trillion in new debt during the reporting period. Fresh or additional loans during the period amounted to only about Rs164 billion.

The rest of the increase reflects changes in legacy government lending and foreign re-lent loans, along with accumulated markup, rollover costs and other existing obligations, the ministry said.

The ministry described the headline and comparison as misleading. It said they conflate a comprehensive fiscal-risk measure with a narrower banking-sector credit measure.

It added that the CMU framework is deliberately designed to give the government and the Cabinet Committee on State-Owned Enterprises (CCoSOE) fuller visibility of SOE indebtedness and the fiscal risks attached to it.