ISLAMABAD: For FY 2023, Federal SOEs underwent rigorous analysis with the full operationalization of the Central Monitoring Unit under the SOE 2023 Act. Gross revenues reached Rs 11,922 billion, a 15% increase from the previous year, primarily driven by inflationary pressures, with the Oil & Financial sectors leading this growth. Total aggregate profits were Rs 703 billion, while loss-making SOEs reported an aggregate loss of Rs 905 billion, up 23% from last year. This resulted in aggregate net losses of Rs 202 billion, reflecting a 25% increase from the previous year.
The book value of assets reached Rs 35,218 billion, up 16%, while liabilities also increased to Rs 29,721 billion, up 20% indicating higher financial leverage. Consequently, net equity stood at Rs 5,496 billion, down 2.55%. Overall portfolio volatility remains of significant concern for the Federal Government with Value at Risk in the higher range.
The Power sector, particularly on the DISCO side, continued to be dominated by loss-making entities. Aggregate losses on the power side totaled Rs 304 Billion even though Rs 759 Billion was spent supporting this sector. Additionally, the infrastructure sector, with high financial costs for entities like NHAs, exacerbated the loss-making scenario.
Railways also continued to contribute to the rising losses. Aggregate losses of these entities for the past 10 years totaled Rs 5,595 Billion. The Government of Pakistan provided aggregate support of Rs 1,021 billion in the form of Equity Injections of Rs 267 Billion, Grants of Rs 223 Billion, Subsidies of Rs 403 Billion, and Loans of Rs 128 Billion to sustain these SOEs and support the economy.
However, this support represented more than 10% of the federal budget’s receipts, indicating significant fiscal strain. Various risks were identified within the SOE sector, notably the substantial working capital lock-up due to aged receivables and payables throughout the SOE chain, leading to a circular debt exceeding Rs 4 trillion. Additionally, operational inefficiencies in the power sector continued to negatively impact SOE profitability with spillover effects all across the chain.
Guarantees provided stood at Rs 1,656 billion, while the debt stock reached Rs 3,545 billion, with accrued interest on NHA loans alone contributing more than Rs 1,100 billion. This substantial level of debt and guarantees issued create significant risks for the sector, exposing it to both systemic and unsystematic risks. Systemic risks, such as economic downturns, inflation, and interest rate fluctuations, can exacerbate the financial strain on SOEs, making debt servicing more challenging which can be seen in the SOE portfolio.
Unsystematic risks, including operational inefficiencies, can further impact individual entities’ financial stability are also visible. The high guarantees and debt levels also place additional pressure on government finances, as it may need to cover liabilities if SOEs fail to meet their obligations, leading to further fiscal strain. These SOEs contributed to the national exchequer in the form of taxes amounting to Rs 466 billion, a 24% increase.
Non-tax revenues, including sales taxes, royalties, and levies collected, amounted to Rs 952 billion, up 58%. Dividends contributed Rs 63 billion, marking a 43% increase.
