In defence of the SOE report

The Central Monitoring Unit, under the administrative control of Finance Minister Muhammad Aurangzeb, uploaded the report titled “Federal State Owned Enterprises (SOEs) Aggregate Annual Report on SOEs Fiscal Year 2025 (July 2024 to June 2025).”In a televised briefing, as opposed to a press conference where reporters would have been able to ask questions, Aurangzeb blamed the media for “selective reading and reporting” of the report.The Finance Minister’s defence of the report was three-fold. First, he argued that a decline in aggregate losses – from 905 billion rupees in 2023 to 851 billion rupees in 2024 to 832 billion rupees in 2025 – led to savings of 142 million per day over a three-year period, an inexplicable claim, given that he is defining lower losses as savings. The report provides details that the Finance Minister may have inadvertently overlooked: “Aggregate profits decreased by 13 percent, falling from 820.7 billion rupees in 2024 to 709.9 billion rupees in 2025. This downward adjustment was primarily attributed to reduced financial contributions from profit-making SOEs in the Oil Sector, a consequence of declining international oil prices. On the loss side, there was a slight improvement, with cumulative losses across SOEs declining by 2 percent. Aggregate losses dropped from 851.4 billion rupees in the previous fiscal year to 832.8 billion rupees in 2025. The net result of these changes in profits and losses was a total net adjusted loss of 122.9 billion rupees for 2025 from 30.6 billion rupees recorded in 2024.”Second, Aurangzeb noted that in 2025 the government extended 2.078 trillion rupees of the taxpayers’ money to SOEs while inflows amounted to 2,119 trillion rupees, giving a net positive inflow of 40 billion rupees. He then proceeded to rightly caution critics that losses had accumulated over decades but added that to reduce the fiscal burden the government took steps to close non-performing entities, including the Utility Stores Corporation (USC) and PASSCO. The report pertains to the period ending 30 June 2025 and hence his claim has little relevance for the period under review. USC closed all operations on 31 July 2025 while the Economic Coordination Committee of the Cabinet, chaired by none other than the Finance Minister, rejected the summary to wind up PASSCO and instead set up a special purpose vehicle (SPV) on 17 November 2025 following objections by the Securities and Exchange Commission of Pakistan (SECP) and directed the Food and Security Ministry to resolve all issues including having the Law Ministry vet the Memorandum of Articles of Association of the SPV and revise the authorised capital to 5 billion rupees.The report provides disturbing details: “In 2025, the balance sheet of SOEs presented a combination of positive and negative trends. Total equity saw an increase of 7 percent, rising from 5,865.2 billion rupees in 2024 to 6,245.7 billion rupees in 2025. This growth was primarily driven by recapitalization efforts and significant equity injections, particularly in the power sector to clear circular debt stock. On the liabilities side, there was a moderate improvement, as total liabilities decreased by 3 percent. The figure declined from 32,570.5 billion rupees to 31,742.4 billion rupees over the course of the year. Total assets remained largely unchanged, exhibiting only a marginal decrease of 1 percent. The value of assets moved from 38,435.7 billion rupees to 37,988.1 billion rupees, indicating relative stability in the overall asset base of the SOE sector during 2025.” The reference to equity must be read as debt rescheduling by the power sector to retire the circular debt, given that the discount rate (borrowing costs) declined from 22 percent by end 2024 to 11 percent effective 16 June 2025. The interest, as in the past, is payable by the consumers which, as per the agreement with the IMF, may be adjusted in the event of a rise in the discount rate through uncapping Debt Service Surcharge limit of 10 percent of revenue requirements.And finally, Aurangzeb maintained that the government has reduced outlay for SOEs due to improved governance through: (a) reducedsubsidies which, he claimed, are a source of theft, leakage, and corruption. It is relevant to note that in the budget he presented for the current fiscal year subsidies were allocated 1,186,036 million rupees – a mere 192,453 million rupees less than the revised estimates of last year. It is noteworthy that some subsidies were placed under the head of Grants and Transfers including 19 billion rupees under the Prime Minister’s Ramazan package and 10 billion rupees under the Prime Minister’s Kamyab Jawan Programme; and (b) privatisation which is generating considerable concerns due to lack of transparency. The sale of First Women Bank was reportedly valued at 14.6 million dollars, though the actual sale amount remains undisclosed to this day. And the buyer’s bid of 132 billion rupees for Pakistan International Airlines envisages only 10 billion rupees to be credited to the Treasury (around 7.5 percent of the total bid) while the remaining 122 billion rupees was defined as buyers’ equity though how much would be invested over what period has not been clarified, generating even more uncertainty.Aurangzeb insisted that structural reforms were being undertaken, but evidence suggests that they are limited to changing the members of the Board of Directors, which has been a standard normal operating procedure of past administrations as well. This accounts for a positive change in the fortunes of the new individual members, though an improved performance of SOEs has not yet been documented.The report notes the following: “In 2025, government fiscal support to SOEs saw an increase, rising to 2,078.5 billion rupees. This represents a 37 percent growth compared to the previous year’s support of 1,512.9 billion rupees. The expansion of fiscal support was driven by significant changes across various components” which include (i) equity injections, read higher borrowing, notably to the power sector, (ii) 34 percent more loans to SOEs, (iii) a decline in grants and subsidies to SOEs as guarantees, loans, and equity rose increasing their indebtedness, and (iv) a rise in sovereign guarantees by 52 percent.To conclude, presenting a favourable picture which may not gel with the facts will inhibit the administration from taking mitigating measures in a timely fashion and may discredit genuine positive claims in the future.Copyright Business Recorder, 2026

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