Editorial

Saddled with debt pile

ThOther state units not similarly large also need a constant pumping of cash to keep running their affairs

Editorial July 08, 2019

It is no secret that public sector enterprises are saddled with a mountain of debt. Generally thought of as inefficient, poorly managed and overstaffed, these entities keep borrowing more cash to stay afloat, adding further to the debt pile and yet they have little in the way of showing a performance boost. A central bank bulletin for the month of July shows that PIA had the largest debt of Rs156.9b until March followed by Wapda with Rs88b and Pakistan Steel with Rs43.2b.

These behemoths aside, other state units not similarly large also need a constant pumping of cash to keep running their affairs. A measure of this can be had from the latest State Bank of Pakistan (SBP) report, which indicates that the loss-making public sector enterprises (PSEs) borrowed 36 per cent more from the banks in the outgoing fiscal year over the preceding year. The report shows that the banks’ lending to the PSEs increased to Rs329.7 billion in 2018-19, which was a record borrowing in a single year. In FY18 it was Rs245b and Rs254b in FY17. The total PSEs borrowing reached Rs1.068 trillion by the end of FY18.

The option of selling off these units is fraught with political implications, which is why governments tread cautiously on the matter. A downside of selling the family silver is large-scale retrenchment of workers, a circumstance which could cost a ruling party its government.

This explains why, despite proclamations to the contrary, the speed of privatization is agonizingly slow. Adviser to PM on Finance Abdul Hafeez Sheikh recently said that the government will take a careful look at all the PSEs and decide which ones need to be retained and turned around and which ones need to be privatised.
Let us sit with our fingers crossed how things pan out.

Published in The Express Tribune, July 08^th, 2019.

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