SOEs’ borrowing blitz

Loss-making SOEs have borrowed a record Rs142 billion already this year

As if enough were not going wrong with the economy, lossmaking state-owned enterprises (SOEs) have borrowed a record Rs142 billion already this year. The lending trend for the first eight months of the fiscal year is also amazing, not just because it comes at a time when almost every company is avoiding borrowing due to the sky-high interest rates, but also because SOEs borrowed just Rs2.5 billion in the corresponding period last year. While the rest of Pakistan is suffering under intense austerity to try and keep the country afloat, lossmaking SOEs, which are already an unnecessary burden on the national exchequer, are erasing any gains made through austerity. It is indeed a time for tough decisions, but this is an easy one — while some SOEs are lossmakers by design because they are supposed to deliver subsidised public services, most of the major lossmakers do not deliver anything that can be called a public service for the masses.

PIA, for example, is the poster boy for failed SOEs. Its ‘public service’ offering is subsidised airfare for government employees, but even this is mostly only availed by politicians, senior bureaucrats and military officers, and not low-ranking staff — meaning it is a subsidy for the rich at the expense of all Pakistani taxpayers. Meanwhile, recent reports suggest PIA can’t even pay its tax bills and is refusing to repatriate funds from closed stations. While the PTI government had drafted a plan to make PIA profitable by 2024, in actuality, despite increasing revenue, the company’s losses went up at an even higher rate. PIA’s borrowing stood at over Rs186 billion by the end of December. Wapda also had huge debt of almost Rs72 billion; while the third biggest borrower, Pakistan Steel Mills, is also the most famous national example of a financial black hole. The Mills borrowed Rs42 billion despite having been closed for the better part of a decade.

At this point, if we can’t sell such companies to make a profit, we must urgently move to liquidate them to cut our losses.

Published in The Express Tribune, March 21^st, 2023.

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