Net losses of state-owned entities increased by 300% in one year

The financial health of state-owned enterprises (SOEs) deteriorated further in the first full fiscal year of Prime Minister Shehbaz Sharif’s government, as their net losses rose 300 percent and these companies received an annual fiscal support of Rs2.1 trillion, according to results announced by the Finance Ministry on Friday.

The combined revenue of SOEs also fell by Rs 1.4 trillion to Rs 12.4 trillion in the 2024-25 financial year, which ended in June last year.

According to the press statement, “there was an overall net loss of Rs 122.9 billion for the SOE sector, compared to a net loss of Rs 30.6 billion in the previous year.” This translates into a 300% jump within a year, rather than showing any improvement in financial performance.

Prime Minister Sharif took office for a second term as Prime Minister in April 2024, but the first full fiscal year of his government began in July 2024 and ended in June 2025.

These results were shared at a meeting of the Cabinet Committee on State-Owned Enterprises (CCoSOEs), which was chaired by Finance Minister Muhammad Aurangzeb.

The Cabinet was presented with the Annual Consolidated Performance Report of Commercial and Non-Commercial State Enterprises (C.E.E.) for 2024-25, prepared by the Central Monitoring Unit (CMU) of the Finance Directorate, according to the announcement.

The Commission was told that in the 2024-25 financial year, the total revenue of SOEs was Rs 12.4 trillion – a decrease of Rs 1.4 trillion, or over 10%, compared to the previous year.

The Finance Ministry said the lower revenue reflected a decline largely due to reduced profitability in the oil sector following a slump in international oil prices.

Total profits of profit-making state-owned enterprises also fell 13 percent to Rs710 billion, compared with Rs821 billion last year, he added.

Total losses of loss-making SOEs narrowed marginally to Rs833 billion. However, despite this, net losses for the entire SOE sector increased by 300%.

The CMU briefed the Commission on the financial and non-financial performance of state-owned enterprises, state support and fiscal flows, state-owned enterprises’ contribution to the treasury, debt profile, corporate governance and compliance status, business plan assessments and the proposed course under the State-owned Enterprises Act, 2023. It was emphasized that the small number of losses remains highly concentrated in the transmission and electricity distribution sectors. The National Highways Authority and several electricity distribution companies continued to contribute significantly to losses, reflecting structural issues, high depreciation and financing costs, and the public service nature of some operations not being commercially viable.

The government said it provided Rs 2.1 trillion in fiscal support to these state-owned enterprises during the year 2024-25, mainly on higher equity infusions to clear the revolving debt stock, while subsidies saw a modest decline.

In the previous financial year, the government had provided Rs 1.1 trillion in fiscal support. Within a year, there has been an increase of more than 80% in budget support, some of which has not yet been budgeted.

The Finance Ministry said inflows from state-owned enterprises to the government rose to Rs2.1 trillion, supported by higher dividends, tax revenue and interest income from government borrowing.

According to the statement, the total debt and contingent liabilities of these entities rose to Rs 11.7 trillion by the end of last financial year. This included Rs 9.6 trillion which includes cash development loans, overseas refinancing loans, bank loans and accrued interest. Guarantees and other off-balance sheet contingencies were reported at Rs 2.2 trillion.

The Committee was also briefed on the quantification of unfunded pension liabilities among SOEs, estimated at around Rs 2 trillion, which was identified as a significant legacy risk requiring policy attention.

The finance minister said the presentation reflected significant progress in oversight, disclosure and risk identification, particularly in the areas of fiscal flows, debt mapping and unfunded pension liabilities.

Committee members stressed the need to enforce audit completion in compliance with the State Enterprises Act 2023 and early transition to IFRS reporting by February 2026.

The State Enterprises Act mandates that all SOEs prepare their financial statements in accordance with IFRS, with full compliance required by February 2026. This transition is critical to strengthening financial governance and boosting investor confidence.

Key IFRS and IAS standards affecting SOEs include IFRS 9 on financial instruments, which applies to sectors such as financial services, insurance, oil and gas and energy.

IFRS 14, which addresses regulatory deferral accounts in the energy and gas sectors. IFRS 15 on revenue recognition particularly related to long-term contracts in oil and gas, electricity and telecommunications. and IFRS 16, which requires the recognition of lease obligations, affecting the transport, infrastructure, natural gas and electricity sectors with Power Purchase Agreements (PPAs).

In addition, IFRS 17 on insurance contracts and IAS standards such as IAS 19 on employee benefits, IAS 20 on government aid and IAS 21 on foreign exchange effects were highlighted as critical for several sectors such as infrastructure, export industries and companies with significant foreign currency exposure.

Adopting these standards will require SOEs to make complex operational and financial adjustments to meet both local regulations and international benchmarks.

The ministerial committee directed that the findings of the report be shared with relevant ministries to inform reform measures and that progress on audits, governance reforms, debt rationalization and fiscal risk containment be regularly reviewed.

The Committee approved the submission of the Annual Consolidated Performance Report for publication.