By Shahid Anwar
Pakistans state-owned enterprise (SOE) problem is no longer a question of diagnosis. It is a question of economic cost.
For years, successive governments have identified loss-making enterprises, announced restructuring plans and considered privatization. Yet the financial burden has persisted. In FY2025, 25 loss-making SOEs recorded combined losses of Rs. 832.8 billion. Profit-making SOEs generated Rs. 709.9 billion, but the sector still recorded a net adjusted loss of Rs. 122.9 billion, compared with Rs. 30.6 billion in FY2024, according to the Finance Divisions Federal SOEs Annual Aggregate Report FY2025.
These figures matter beyond individual balance sheets. Pakistan is pursuing fiscal consolidation, revenue mobilization and measures to contain fiscal risks. At the same time, the government continues to carry enterprises that consume public resources without generating an adequate economic return.
The issue, therefore, is not simply how much SOEs are losing. It is how much the country is losing by delaying decisions about them.
Pakistans fourth review under the International Monetary Funds (IMF) Extended Fund Facility is scheduled for September 15, 2026, based on end-June 2026 performance. SOE reform forms part of the broader programme to reduce the states commercial footprint, strengthen governance and contain fiscal risks. The review provides an opportunity to ask a more practical set of questions: What has changed? What remains unresolved? And when will taxpayers begin to see the benefits? (IMF, Pakistan: Third Review Under the Extended Fund Facility, May 2026.)
Beyond the Annual Loss
The Rs. 832.8 billion loss is only the most visible part of the problem. The wider cost includes government support, guarantees, accumulated liabilities, financing costs and the opportunity cost of scarce public capital.
Government support to SOEs rose by 37 percent to Rs. 2.078 trillion in FY2025. SOE debt stood at Rs. 9.571 trillion, while unfunded pension liabilities amounted to Rs. 2.030 trillion and government guarantees stood at Rs. 2.164 trillion.
These figures demonstrate why SOE reform cannot be judged solely through annual profit-and-loss statements. Fiscal risk also resides in debt, guarantees, pension liabilities and continuing government support. (Finance Division, Federal SOEs Annual Aggregate Report FY2025.)
At the same time, the fiscal relationship between the state and SOEs is more complex than simply adding up government support. SOEs contributed Rs. 2.119 trillion to the government in FY2025, resulting in a reported net flow to the government of Rs. 40.7 billion.
The concern, therefore, is not that every SOE is a fiscal drain. Rather, substantial public support and large liabilities remain concentrated in parts of the portfolio. (Finance Division, Federal SOEs Annual Aggregate Report FY2025.)
The SOE sector generated approximately Rs. 12.4 trillion in revenues in FY2025. But size alone does not justify continued state ownership. The relevant question is whether an enterprise has a clear economic, strategic or public-service rationale for remaining under government control. (Finance Division, Federal SOEs Annual Aggregate Report FY2025.)
This distinction is important. Accumulated losses should not automatically be treated as proof that an enterprise is currently commercially unviable. They reflect an organisations financial history. Current operating performance, future investment requirements, service obligations and the case for continued state ownership must also be considered.
For policymakers, however, these figures demonstrate the financial legacy that has accumulated over time. The central question should be whether continuing with the existing ownership model is likely to create more value than restructuring or introducing private participation.
This is where Pakistan should begin measuring the cost of delay.
For major SOEs, the government could publish annual losses, government support, additional liabilities and the expected fiscal benefit from restructuring, privatization or winding up. Such transparency would make the cost of waiting visible to policymakers and taxpayers alike.
From Reform Architecture to Results
Pakistan has already developed much of the institutional framework required for SOE reform. The government has been strengthening the Central Monitoring Unit, requiring commercial SOEs to prepare business plans and Statements of Corporate Intent, and improving board governance.
In August 2026, the Finance Division issued Directors Appointment and Evaluation Guidelines for SOEs. These are useful steps. But governance reforms ultimately matter because they improve decision-making and performance.
A better board, by itself, is not a fiscal saving. A business plan is not a reform outcome unless it changes the performance of the enterprise.
For commercially oriented SOEs, board and management appointments should therefore be linked to measurable financial and operational targets, with performance assessed against agreed milestones. Independent directors are necessary, but accountability for results must also be clear.
Every major SOE undergoing reform needs a clear decision and a clear timeline.
The options are not limited to privatization. Depending on its role and future viability, an enterprise could be retained and reformed, restructured, privatized, outsourced, merged or wound up. The important point is that the decision should be based on economic logic rather than institutional inertia.
The government has also begun categorizing SOEs according to financial sustainability and reviewing their financial and non-financial performance. The next step is to connect these assessments to measurable outcomes.
For major SOEs, the government should establish three-year reform plans with annual targets for reducing losses and government support, lowering debt, improving operational efficiency and, where appropriate, increasing private participation. Progress should be publicly disclosed and tracked rather than left at the level of broad reform commitments.
For each major SOE under reform, the public should be able to see a concise set of indicators covering:
- financial performance;
- government support;
- debt and guarantees;
- reform milestones;
- management accountability; and
- the expected date for achieving the agreed outcome.
The distinction between public-service obligations and commercial losses is equally important.
Where the government requires an SOE to provide a service for public-policy reasons, that obligation should be clearly defined, costed and transparently budgeted. Commercial losses should not be allowed to remain hidden behind a broad claim of public service.
Pakistan already has a Public Service Obligations Costing framework for SOEs. The priority now is effective implementation. (Finance Division, Government of Pakistan.)
SOE reform should also address preferential treatment in public procurement. Where commercially oriented SOEs receive contracts without effective competition, the government should ensure that exceptions are narrowly defined, transparently disclosed and justified by a genuine public-interest requirement.
Otherwise, state ownership can create an uneven playing field for private firms.
PIA as a Test of Execution
The recent experience with Pakistan International Airlines Corporation Limited (PIACL) is significant because it demonstrates that a difficult SOE transaction can move from policy discussion to implementation.
Following the first financial closing in June 2026, management control of PIACL was transferred to an investor consortium led by Arif Habib Corporation Limited.
The transaction involved a total investment commitment of Rs. 180 billion, including Rs. 55 billion for the government and Rs. 125 billion in fresh equity for PIACL. At the first closing, Rs. 10 billion was paid to the government and Rs. 80 billion was injected as fresh equity, with a further Rs. 45 billion investment commitment scheduled for the second closing. (Privatization Commission, Government of Pakistan, June 2026.)
The significance of PIA is not simply the transaction itself. The more important question is whether the process can provide a model for other enterprises.
The government is also progressing with other transactions, including work involving power distribution companies and airport outsourcing. The Privatization Commission has advanced the first batch of DISCO transactions involving FESCO, GEPCO and IESCO, with investor participation and due-diligence processes under way.
But the number of transactions should not become the primary measure of success. (Privatization Commission, Government of Pakistan, 2026.)
The real test is whether each restructuring or transaction reduces the fiscal burden, improves efficiency and creates better conditions for private investment.
This is where SOE reform becomes a broader economic reform. Reducing the governments commercial footprint can create space for private capital, improve competition and allow public resources to move towards areas where the state has a stronger economic role.
For Pakistan, the implications extend beyond fiscal management. A more efficient allocation of capital can support investment, productivity and export competitiveness.
From Commitments to Results
Pakistan does not lack awareness of the SOE problem. It has policies, institutions, governance reforms and an active privatization programme.
The harder task is execution.
The September 15 IMF review should therefore be viewed as an opportunity to demonstrate measurable progressnot simply reiterate commitments.
Five questions should guide the next phase of SOE reform:
- How much public money will be saved?
- How many losses will be eliminated or reduced?
- How much private investment will be unlocked?
- How much will efficiency and service delivery improve?
- When will taxpayers see the results?
These questions matter because reform has a time dimension.
An enterprise that continues to lose money while waiting for a decision does not stand still. Losses accumulate, liabilities can increase and the opportunity cost grows.
Pakistan should therefore measure not only the cost of reform, but also the cost of waiting.
The objective should not simply be to sell SOEs. Nor should it be to keep them under government ownership at any cost. The objective should be to determine where the state adds economic value, where it does not, and how quickly resources can be redirected towards more productive uses.
That is the real economic test of SOE reform.
Pakistan has spent years discussing what should be done with its state-owned enterprises. The priority now is simpler:
Make the decisions. Implement them. Measure the results.
About the Author
Shahid Anwar is an Economic Analyst and Business & Trade Advisor and former Secretary General of the Federation of Pakistan Chambers of Commerce & Industry (FPCCI). He also served as Senior Director Research at the Institute of Cost and Management Accountants of Pakistan (ICMAP) and has 36 years of experience in economic, business and trade affairs. He provides advisory support on trade, investment and business partnerships. He can be reached at shahid.anwar.writer.26@gmail.com.
Disclaimer
This article is intended for informational and analytical purposes only and reflects the views and analysis of the author. The statistics and information cited are based on publicly available government and institutional reports referenced in the article. While reasonable care has been taken to present the information accurately, readers should independently verify figures and developments before making financial, investment, business or policy decisions. The views expressed do not necessarily represent those of any government institution, organization, publication, or other entity mentioned in the article.
