The government has made fixing state-owned enterprises (SOEs) one of the loudest talking points of recent years. Every budget speech, every IMF review, every international lender meeting includes the same promises: comprehensive reform, privatization where feasible, better governance, and an end to the endless drain on the public purse.
Prime Minister Shehbaz Sharif’s administration has repeated these commitments since taking office, often framing SOE restructuring as the cornerstone of fiscal sustainability and economic revival. Yet when you look at the hard numbers released last week (around January 9–10, 2026) by the Finance Ministry during a meeting of the Cabinet Committee on State-Owned Enterprises (CCoSOEs), the gap between rhetoric and reality feels almost painful. In FY2024-25 — the first full fiscal year under the current government — the cumulative net losses of SOEs ballooned by nearly 300%, rocketing from Rs30.6 billion in FY2023-24 to a staggering Rs122.9 billion. That’s not a minor setback; it’s a dramatic worsening of an already chronic problem.
The broader picture is equally troubling. Total revenues across all SOEs fell by more than 10% to roughly Rs12.4 trillion, even as the wider economy was supposed to be stabilizing after years of turbulence. Among the handful of profitable entities, aggregate profits slipped 13% to around Rs710 billion (some breakdowns put it at Rs709.9 billion). The loss-making ones showed almost no improvement — their combined losses shrank by a negligible 2% to approximately Rs833 billion — which is, in practical terms, no turnaround at all. To stop the bleeding and keep operations running, the government injected a massive Rs2.1 trillion in fiscal support during the year. The bulk of that went toward equity injections aimed at addressing circular debt accumulation, particularly in the power sector.
In other words, public money — money that could have gone toward schools, hospitals, roads, or targeted social protection — is being used primarily to manage ongoing distress rather than to solve the structural failures that keep producing it. This isn’t a one-off emergency bailout; it’s become a structural feature of Pakistan’s fiscal landscape.
The Finance Ministry has pointed to falling international oil prices as a major reason for the revenue drop, arguing that lower global crude squeezed margins in the oil and gas sector. That explanation carries some weight, but it only goes so far. Oil price movements can’t fully account for the sheer scale of the deterioration or the fact that losses remain heavily concentrated in a small group of perennial underperformers: the National Highway Authority (NHA), which reportedly absorbed around Rs153 billion in losses, and several power distribution companies (DISCOs), which continue to hemorrhage cash year after year.
This concentration is telling. These entities aren’t suffering from temporary market shocks; they’re trapped in deep, long-standing structural decay. Nowhere is this more visible than in the power distribution companies. The DISCOs have become the textbook example of systemic failure in Pakistan’s energy sector. Aging transmission and distribution networks lose enormous amounts of electricity through a combination of technical inefficiencies, rampant theft, and line losses that routinely exceed regulatory benchmarks. NEPRA’s State of the Industry Report for 2025 estimated that poor DISCO performance alone contributed roughly Rs397 billion to the power sector’s circular debt pile in FY25 — even as overall circular debt in the sector saw some moderation (down to around Rs1.614 trillion by mid-2025 thanks to refinancing deals and tariff adjustments).
High depreciation charges on outdated infrastructure inflate balance sheets without delivering corresponding revenue. At the same time, DISCOs borrow heavily to cover cash shortfalls and service accumulated circular debt, piling on interest expenses that lock them into a self-reinforcing cycle of financial stress. Governance issues — political interference in appointments, weak accountability, and slow decision-making — compound the problem, making genuine operational improvement almost impossible without radical change.
Even the “profitable” SOEs raise serious questions. Many of them generate returns only because they operate in protected environments with guaranteed government contracts, regulated tariffs, or monopoly positions. Strip away those protections and expose them to genuine market competition, and it’s far from clear how many would remain viable without continued subsidies or special treatment. Given all this, the need for a bold, coherent, and urgently executed reform agenda should be beyond debate.
Yet progress on the ground has been frustratingly slow and fragmented. Some steps have been taken — the privatization of Pakistan International Airlines was hailed as a milestone, Utility Stores were shut down, and there have been approvals for handing over certain power utilities or airports to private management. The Asian Development Bank’s approval of $540 million in financing (a $400 million results-based loan for SOE transformation plus $140 million for coastal resilience in Sindh) in December 2025 is meant to support governance improvements, competition, and efficiency gains. But these moves feel more like isolated wins than parts of a comprehensive strategy.
Too often, reforms appear driven more by external pressure from the IMF and other lenders than by internal political conviction. Bureaucratic resistance, vested interests, and the fear of short-term political fallout continue to slow momentum. Meaningful change would require much more: a full sectoral reorganization in power and transport, genuine deregulation to allow competition where possible, the establishment of strong, independent corporate governance frameworks, and a clear roadmap for privatizing or restructuring the chronic loss-makers. Until that happens, the reform narrative will continue to ring hollow. The financial hemorrhage will persist, draining resources that the country desperately needs elsewhere. Each year of delay makes the eventual fixes more painful, more expensive, and more politically difficult.
Pakistan stands at a crossroads. The FY2024-25 numbers are not just statistics; they are a stark warning. Promises and roadmaps are easy to produce. Turning around deeply entrenched, inefficient giants like the DISCOs and NHA demands real political courage, sustained execution, and the willingness to confront vested interests head-on. Without that decisive action on governance, accountability, and — where appropriate — privatization, the SOE burden will keep growing, weighing down the national budget, crowding out productive investment, and ultimately hitting ordinary taxpayers hardest. The cost of inaction is already painfully clear; the question now is whether the government will finally match words with the kind of bold moves the numbers so urgently demand.