Power sector losses drag state-owned entities' profits

Islamabad: The financial health of Pakistan's state-owned entities (SOEs) deteriorated significantly in the first half of FY26, with aggregate profitability plummeting by 30 per cent. This decline affected all seven core performance areas, raising fiscal and macroeconomic risks for the nation. The power sector, the weakest performer, saw a Rs374bn increase in circular debt, equivalent to 11pc of total federal budgetary receipts, due to inefficiencies and poor recoveries.

Fiscal support, mainly through subsidies, grants, loans, and equity injections, reached nearly Rs6.6bn per day to offset the losses, estimated at Rs2.8bn per day. The SOEs' overall balance sheet remained highly leveraged, with debt exceeding Rs10tr, including Rs2.5tr in foreign currency liabilities. This exposed the country to exchange rate risks, refinancing pressures, and external account volatility.

The report highlighted that while there was a slight dip in losses, the narrowing profit-loss spread indicated increasing fiscal and operational pressures. The SOE sector's financial position slipped slightly, with equity falling by 3pc and total assets down by 2pc. Nevertheless, the declining equity level, combined with high leverage, left the sector vulnerable to fiscal and refinancing risks, especially in capital-intensive industries like power, infrastructure, and transport.