Following the successful sale of Pakistan International Airlines’ (PIA) majority stake, the country has begun to pay greater attention to the elephant in the room: loss-making state-owned enterprises (SOEs). The Central Monitoring Unit (CMU) of the Ministry of Finance has now released a damning aggregate report on the performance of SOEs, as required by the IMF. The report highlights over Rs2 trillion in unfunded liabilities across all federal SOEs, including more than Rs1.5 trillion in unfunded pension liabilities in the power sector alone, as well as around Rs1.9 trillion in circular debt, despite an approximately Rs800 billion capital injection during FY2025. The findings should be a wakeup call for policymakers who have been ignoring this segment for far too long. There is a growing consensus among economic experts and financial analysts that the state has no role in business. Right after PIA’s privatisation, many experts believed reforms in the energy sector ought to be top priority, followed by continuation of the privatisation programme.
The fact that the power sector is carrying liabilities of Rs9.2 trillion, roughly half the size of the federal budget, supports the experts’ point. The structurally mismanaged sector has now been formally accused by the government’s own monitors of lacking a credible plan to operate as a going concern. The report also identifies that business plans from distribution companies promise better recoveries and reduced losses, but omit the financial modelling needed to demonstrate how and when such improvements will materialise. Generation companies, meanwhile, retain obsolete plants, allocating additional funds after poor decisions to justify past investments. Capital remains trapped in low-yield assets because no one is willing to write down history and move forward.
Pakistan cannot stabilise its economy while allowing structurally insolvent enterprises to absorb funds without measurable returns. It did that with its airline, where years were wasted. Meaningful reforms require more than compliance with the IMF. The country needs politically difficult decisions to turn its economy around. It should be focusing on privatisation where viable, closure where necessary, and pension reform that addresses unfunded liabilities transparently. Pakistan cannot continue to bleed funds it does not have. Reliance on IMF bailouts is not a good economic strategy if we are to become an empowered nation. Scant public finances cannot be plundered on organisations that lack strategic direction. Performance metrics must link directly to capital allocation. The current finance team has demonstrated its readiness to make unpopular decisions to fix the broken system once and for all. It is time to move forward.
