Inefficiencies of Public Sectors Enterprises (PSEs) have resulted in higher lending from the domestic banking system to ease financial issues. According to the State Bank of Pakistan (SBP), PSEs borrowed over Rs 74 billion during first nine months of current fiscal year and the borrowed amount is double than the entire borrowing obtained during last fiscal year 2013.
"Current borrowing trend is showing that PSEs are facing monetary problems and need additional financial support from the banking system for smooth business operations," bankers said. Last year, the federal government, showing serious concern over the performance of loss-making PSEs, decided to appoint professional CEOs and independent boards for PSEs aimed at reducing their losses and run these entities in a professional way. However, the proposed plan has yet to be fully implemented by the federal government with the result there's a continued borrowing, they added.
They said loss-making PSEs are consuming billions of rupees annually from the budget, therefore the government has planned to privatise some PSEs to reduce fiscal deficit. Initially, privatisation of OGDCL, Pakistan Steel and PIA is on the cards, they said. According to the State Bank of Pakistan, PSEs borrowed some Rs 74.3 billion during the July-March of this fiscal year and the total debt reached Rs 386.5 billion as on March 31, 2014 compared to Rs 312.2 billion as on June 30, 2013.
The borrowed amount, during first nine months of FY14, is double than the entire borrowing in FY13. The PSEs obtained some Rs 31.1 billion during FY13 compared to Rs 74 billion in nine months of FY14. During the period under review, Water and Power Development Authority (Wapda) obtained some Rs 15.4 billion and its overall debt reached Rs 24.4 billion in March 2014 up from Rs 9 billion in June 2013. Oil and Gas Development Corporation's debt surged to Rs 2.6 billion in March 2014 compared to Rs 0.9 billion in June 2013, depicting an increase of Rs 1.7 billion. With an increase of Rs 6.4 billion, PIA's debt rose to Rs 67.5 billion. Pakistan Steel Mills also borrowed some Rs 6.4 billion during the period under review. Overall debt of Pakistan Steel reached Rs 42.4 billion till March ended quarter against Rs 36 billion in June last year.
However, during the period under review, PSEs liabilities posted some decline and stood at Rs 207.7 billion in March this year against Rs 225.9 billion June last year. Analysts said the rising borrowing shows that PSEs are not performing well and depending on external funding for smooth operation. "Although, government publicised posts of PSEs and invited applications for appointment of CEOs, however so far not a single appointment has been made against these applications," they added. Analysts said at the end of this fiscal year, PSEs' debt will be less than current level as some transactions will be settled in June. They urged the government to implement PSEs' restructuring plan in a proper manner to make them profitable.
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