Power Sector Losses Weigh Down State-Owned Entities’ Profitability in Pakistan

ISLAMABAD: The profitability of Pakistan’s state-owned entities (SOEs) has plummeted by 30% in the first half of FY26, reflecting a significant decline in performance across seven core sectors and heightening fiscal risks for the nation.

According to the SOEs Monitoring Report released by the Ministry of Finance on Monday, the power sector has emerged as the weakest link, with loss-making SOEs accumulating an estimated loss of Rs2.8 billion daily. The report highlights that fiscal support through subsidies, grants, loans, and equity injections has surged to nearly Rs6.6 billion per day, exacerbating the financial strain. The circular debt in the power sector alone has escalated by Rs374 billion, attributed to inefficiencies and poor recovery rates.

This fiscal burden, equivalent to approximately 11% of total federal budgetary receipts for the six-month period, continues to stifle developmental expenditure and compress fiscal flexibility, thereby weakening the sovereign fiscal buffers, the Ministry lamented.

The overall balance sheet of SOEs remains heavily leveraged, with total debt exposures surpassing Rs10 trillion, including around Rs2.5 trillion in foreign currency liabilities. As the government grapples with these challenges, stakeholders are calling for urgent reforms to stabilize the power sector and restore profitability.