Finance Division would like to note that the interpretation by some sections of the media of the decline in net fiscal flow as a deterioration in the financial performance or financial health of State-Owned Enterprises (SOEs) is not correct. Fiscal flow and SOE financial performance are two distinct measures. Fiscal flows primarily capture transactions between the Government and SOEs including Government support and receipts through taxes, dividends, levies and other payments, whereas SOE financial performance is assessed through profitability and other financial and operational indicators.
During H1 FY2025-26, profitable SOEs generated Rs423.3 billion in aggregate profits, while losses of loss-making SOEs remained broadly contained at Rs342.8 billion. The containment of losses is an important indicator of progress under the ongoing SOE reform and monitoring framework.
During the period, SOEs remained net contributors to the Government, generating Rs839.8 billion in inflows against Government outflows of Rs804.0 billion, resulting in a positive net fiscal flow of Rs35.8 billion. The increase in Government outflows was driven significantly by equity injections and financing associated with restructuring and circular-debt management, while dividends increased by 26% and tax contributions from SOEs increased by 10%.
Accordingly, movements in net fiscal flow should be understood in the context of the timing and composition of Government–SOE transactions and should not be interpreted as a standalone measure of SOE profitability or financial performance.
Equally important, assessing SOE reform only through a six-month fiscal-flow comparison overlooks the structural reforms already under execution. Utility Stores Corporation has ceased operations; Pakistan Agricultural Storage and Services Corporation is being wound up; First Women Bank Limited has been privatised; and Pakistan International Airlines has been privatised. In the power sector, nine distribution companies, Faisalabad Electric Supply Company, Gujranwala Electric Power Company, Islamabad Electric Supply Company, Lahore Electric Supply Company, Multan Electric Power Company, Hyderabad Electric Supply Company, Sukkur Electric Power Company, Peshawar Electric Supply Company, and Hazara Electric Supply Company, are included in the privatisation programme and are at various stages of the transaction process, alongside a broader SOE restructuring and privatisation pipeline, with strong local and global investor interest already received for the first batch.
Governance reforms are also strengthening independent and professional boards, business-plan accountability, performance monitoring and transparent, data-driven oversight across the portfolio.
The direction of reform is therefore clear: a smaller SOE footprint, stronger governance and accountability, greater transparency, improved commercial discipline and progressively lower fiscal risk. The Government remains fully cognisant of the challenges that persist in parts of the SOE portfolio and is addressing them through restructuring, closure, privatisation and stronger performance management based on the circumstances of each entity.
