Finance Division rejects claims of SOE financial deterioration, cites Rs35.8bn net fiscal inflow

The Finance Division on Wednesday pushed back against media interpretations linking a decline in net fiscal flow to a deterioration in the financial health of State-Owned Enterprises (SOEs), saying the two are “distinct measures” that should not be conflated.

In a press release, the ministry said fiscal flows capture transactions between the government and SOEs — including support extended by the state and receipts through taxes, dividends, levies and other payments — while SOE financial performance is separately assessed through profitability and other financial and operational indicators.

According to the statement, profitable SOEs posted aggregate profits of Rs423.3 billion during the first half of FY2025-26, while losses at loss-making entities were “broadly contained” at Rs342.8 billion. The Finance Division described the containment of losses as an important indicator of progress under the ongoing SOE reform and monitoring framework.

SOEs remained net contributors to the government during the period, generating inflows of Rs839.8 billion against government outflows of Rs804.0 billion — a positive net fiscal flow of Rs35.8 billion. The rise in government outflows, the ministry said, was driven largely by equity injections and financing tied to restructuring and circular-debt management, even as dividend receipts grew 26 percent and tax contributions from SOEs rose 10 percent.

“Movements in net fiscal flow should be understood in the context of the timing and composition of government-SOE transactions and should not be interpreted as a standalone measure of SOE profitability or financial performance,” the statement said.

Reform pipeline cited

The Finance Division argued that judging SOE reform on a six-month fiscal-flow comparison alone overlooks structural changes already under way. It pointed to the closure of Utility Stores Corporation, the ongoing wind-down of the Pakistan Agricultural Storage and Services Corporation, and the completed privatisations of First Women Bank Limited and Pakistan International Airlines.

In the power sector, nine distribution companies — Faisalabad Electric Supply Company (FESCO), Gujranwala Electric Power Company (GEPCO), Islamabad Electric Supply Company (IESCO), Lahore Electric Supply Company (LESCO), Multan Electric Power Company (MEPCO), Hyderabad Electric Supply Company (HESCO), Sukkur Electric Power Company (SEPCO), Peshawar Electric Supply Company (PESCO) and Hazara Electric Supply Company (HAZECO) — are included in the privatisation programme and are at various stages of the transaction process. The ministry said the broader restructuring and privatisation pipeline has already drawn “strong local and global investor interest” for its first batch.

Governance reforms are also under way, the Finance Division said, aimed at strengthening independent and professional boards, business-plan accountability, performance monitoring, and transparent, data-driven oversight across the SOE portfolio.

“The direction of reform is therefore clear: a smaller SOE footprint, stronger governance and accountability, greater transparency, improved commercial discipline and progressively lower fiscal risk,” the ministry said, adding that it remains “fully cognisant” of the challenges that persist in parts of the portfolio and is addressing them through restructuring, closure, privatisation and stronger performance management tailored to each entity’s circumstances.