ISLAMABAD: The aggregate profitability of Pakistan’s state-owned enterprises (SOEs) declined by 30 per cent during the first half of FY2026 as their overall financial performance deteriorated across key indicators, increasing fiscal and macroeconomic risks for the government.
According to the July-December 2025 SOEs Monitoring Report released by the Ministry of Finance, the power sector remained the weakest-performing segment, while the aggregate losses of loss-making SOEs amounted to around Rs2.8 billion per day. Meanwhile, government support through subsidies, grants, loans and equity injections reached nearly Rs6.6bn per day.
The report noted that power sector circular debt increased by Rs374bn during the period, driven largely by operational inefficiencies and weak recoveries.
The Ministry of Finance said the continuing fiscal burden was equivalent to approximately 11 per cent of total federal budgetary receipts over the six-month period, limiting fiscal space and putting pressure on development spending and sovereign fiscal buffers.
SOE Debt Exceeds Rs10 Trillion
The broader SOE balance sheet also remained highly leveraged, with total debt exposures exceeding Rs10 trillion. Of this, around Rs2.5tr comprised foreign-currency-denominated liabilities, including foreign relent loans.
The report warned that the high level of foreign-currency exposure leaves the government vulnerable to exchange-rate movements, refinancing pressures and external-account volatility.
The Ministry of Finance observed that the SOE sector has evolved from being primarily a governance challenge into a significant sovereign balance-sheet vulnerability, with implications for fiscal sustainability, debt dynamics, sovereign creditworthiness and external financing requirements.
Earnings Decline 30pc
During the first half of FY2026, aggregate SOE profits declined by 7pc, falling from Rs457.2bn in the corresponding period of FY2025 to Rs423.3bn.
Meanwhile, cumulative losses among loss-making SOEs remained almost unchanged, edging down marginally from Rs342.9bn to Rs342.8bn.
As a result, the sector’s net adjusted profit fell to Rs80.5bn, compared with Rs114.3bn in the first half of FY2025 — a contraction of around 30pc.
The Central Monitoring Unit (CMU) of the Ministry of Finance said that, despite the marginal consolidated profit, the narrowing gap between profits and losses reflected growing fiscal and operational pressures across the federal SOE portfolio.
Balance Sheet Weakens
The report also recorded a modest deterioration in the aggregate balance sheet.
Total equity declined by 3pc, from Rs6.629tr to Rs6.407tr, while liabilities fell by around 1pc, from Rs31.092tr to Rs30.7tr.
Consequently, total assets contracted by 2pc, from Rs37.721tr in the first half of FY2025 to Rs37.107tr during the same period of FY2026.
The report cautioned that declining equity, combined with elevated leverage, continued to expose the SOE portfolio to significant fiscal and refinancing risks, particularly in capital-intensive sectors such as power, infrastructure and transport.
Profit Concentration Remains a Risk
The report further highlighted the concentration of aggregate SOE profitability among a limited number of entities, particularly those operating in the oil and gas and financial sectors.
This concentration exposes the broader SOE portfolio to commodity-price fluctuations, exchange-rate movements, regulatory changes and wider macroeconomic cycles.
The continued financial weakness of the power sector, coupled with rising circular debt and substantial government support, remains a key source of pressure on Pakistan’s public finances and the overall performance of state-owned enterprises.
Story by Khaleeq Kiani
