As of 2022-23, Pakistani state-owned enterprises (SOEs) have suffered losses in excess of Rs905 billion, a staggering 23% increase over the previous fiscal year of 2021-22, showing a further decline in economic activity in the country.
Those findings were made public in a report titled “Aggregate Annual Report on Federal State-Owned Enterprises (SOEs) for Financial Year 2023,” released on Tuesday by the Central Monitoring Unit (CMU) of the Finance Division, which was released in accordance with customary operating procedures.
There was an increase of 25% year-over-year in gross losses due to these losses, resulting in an aggregate net loss of Rs202 billion. The amount of liabilities from the company increased by 20%, which indicates that there is a higher degree of financial leverage on the company.
The net equity of the company decreased by 2.55% as a result, leaving it at Rs5.49 trillion. Value at Risk continues to be a concern for the federal government, as the level of volatility in overall portfolios remains elevated.
It is important to note that losses remain a significant problem in the power sector, particularly within distribution companies (DISCOs). As a result of the power sector, an aggregate loss of Rs304 billion has been reported, despite Rs759 billion being allocated for the sector’s support.
There were also entities in the infrastructure sector, such as the National Highway Authority (NHA), incurred high financial costs, which was one of the contributing factors to the overall loss-making situation.
In the past decade, there has been an increase in losses in the railway sector, with aggregate losses in the sector reaching Rs5,595 billion over the past decade.
There has been a total of Rs1.021 billion of support provided by the government of Pakistan in a variety of forms, including equity injections (Rs267 billion), grants (Rs223 billion), subsidies (Rs403 billion) and loans (Rs128 billion), in order to sustain these SOEs and bolster the economy as a whole.
It is important to note, though, that the government has received over 10% of its budget from this support, underscoring significant strain in the federal budget.
In the SOE sector, several risks have been identified, including a substantial working capital lock-up resulting from age-related receivables and payables, resulting in a circular debt approaching four trillion rupees throughout the chain.
A number of operational inefficiencies continue to negatively impact SOE profitability in the power sector, which cascades throughout the entire supply chain.
It has been estimated that Rs1,656 billion have been guaranteed, whereas the debt stock has reached Rs3,545 billion, with the accrued interest on the NHA loans alone amounting to more than Rs1,100 billion.
As a result of these high debt and guarantee levels, the sector is exposed to both systemic risks as well as unsystematic risks that pose significant risks for the sector. There are numerous systemic risks that SOEs are exposed to, including economic downturns, inflation, and interest rate fluctuations, which exacerbate the financial strains on SOEs and make debt servicing more difficult.
There were Rs466 billion in taxes contributed by SOEs to the national exchequer, which represents a 24% increase compared to last year, while non-tax revenues accounted for Rs952 billion, an increase of 58% compared to this year. There was a 63 billion rupee increase in dividends, which represents a 43% increase from the previous year.
It was stated in the report that improving corporate governance was critical to the future success of the organization. This would necessitate the appointment of more independent and technically qualified directors in order to ensure a streamlined approach to governance and robust monitoring criteria.
Timenews1 provided that news.
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