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Pakistan’s public sector enterprises (PSEs) are a major source of fiscal burden and economic inefficiency in the country. Nowadays, majority of public sector organizations are losing money, have a ton of debt, and many operational inefficiencies.
According to a recent report by the World Bank, the total liabilities of loss-making PSEs in Pakistan have ranged from 12 percent to 18 percent of GDP in recent years, a remarkably high percentage. The report also stated that the PSE sector in the country is more than twice as large as the international benchmark, controlling for the size of the economy.
The PSEs operate in various sectors, such as power, oil and gas, railways, airlines, steel, and banking. However, most of them suffer from poor governance, lack of accountability, political interference, overstaffing, and low productivity. The PSEs also receive substantial subsidies and guarantees from the government, which distort market incentives and crowd out private investment. The PSEs’ losses not only increase the fiscal deficit and public debt, but also undermine the quality and availability of public services.
The government has initiated a comprehensive reform program to address the challenges posed by the PSEs. The program includes triage of the existing PSE portfolio for the purpose of categorization for retention, privatization and liquidation. The government has identified 44 entities for privatization, including the power companies that are causing big losses. The government has also set timelines for the restructuring and privatization of the PSEs, which will be monitored by the Cabinet Committee on State Owned Enterprises (CCoSOEs) through the Central Monitoring Unit (CMU) in the Finance Division.
The reform of the PSE sector is crucial for improving country’s economic performance and social welfare. The reform program’s effective execution will ease financial strains, boost productivity and competitiveness, free up funds for high-priority spending, and improve service delivery to the citizens. The reform will also contribute to Pakistan’s resilience against natural disasters, such as floods, which have caused damages and losses of over $30 billion in the past decade.
