Pakistan News

Credit to loss-making state-run enterprises up 45pc

Credit to loss-making state-run enterprises up 45pc

KARACHI: The loss-making public sector enterprises (PSEs) borrowed Rs115 billion during the first seven months of this fiscal year, reflecting the government’s utter failure to make them profitable.

A latest report by the State Bank of Pakistan showed that banks extended Rs115.58bn loans to PSEs during the July-January period of 2017-18 while the government already borrowed Rs368bn for budgetary support during the same period.

The flow of funds from the banking sector towards the PSEs has increased by 45 per cent compared to 2016-17. The credit to PSEs during the first seven months of 2016-17 stood at Rs79.8bn.

Recently, the International Monetary Fund has said that annual losses of ailing public sector enterprises swelled to 3.8pc of GDP while Pakistan International Airlines (PIA), Pakistan Steel Mills (PSM), Pakistan Railways and power distribution companies are incurring financial losses equivalent to 0.3pc of GDP.

The Asian Development Bank has recently offered technical assistance to turn around loss-making public sector’s entities including PIA and Railways.

The national flag carrier accumulated losses to over Rs146bn during the last four years, forcing the airline to discontinue some important routes.

Pakistan Railways also suffered a loss of over Rs26bn in 2016-17 even after the recent improvements in its services.

Similarly, PSM has been incurring monthly losses of Rs509 million despite injections of billions of rupees by the government for clearance of its liabilities, restructuring and tax incentives on import of raw material.

The government tried to privatise PIA and PSM but the opposition launched a campaign to prevent any such attempts.

The SBP report showed that the loss-making PSEs have accumulated a total debt of Rs822.8bn by the end of June 2017. It included the debts of Rs109bn in FY16 and Rs255bn in FY17, showing an over twofold increase.

However, the current trend shows that credit flows to the PSEs could be even higher than the last year as the credit surge of 45pc so far has demonstrated.

Water and Power Development Authority is another loss making entity which recorded the highest increase in its debt, jumping to Rs62bn at the end of December 2016 compared to Rs14.4bn a year ago. However, no efforts have yet been made to privatise the organisation.

Published in Dawn, February 8th, 2018

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