PSEs’ debt surges 45 percent to Rs823 billion in FY17

KARACHI: Debt of public sector enterprises (PSEs) climbed 44.8 percent to Rs822.8 billion during the last fiscal year of 2016/17, the central bank’s data showed on Friday. 

PSEs’ debt amounted to Rs568.1 billion during the fiscal 2015/16, the State Bank of Pakistan’s (SBP) figures revealed.  Such debts were equal to 2.6 percent of gross domestic product (GDP) in FY2017.

A bulk of the domestic debt’s increase came from ‘others’ head during the last fiscal year. SBP’s data revealed that debt under this head increased to Rs572.6 billion in 2016/17 from Rs367.3 billion a year ago.   

Analysts said the ‘others’ head denotes companies from energy sector. Government set up Power Holding Private Limited to get the power distribution companies rid of circular debt affecting all the entities involved in energy sector, including Pakistan State Oil. 

PSO also availed bank financing to manage liquidity constraints in view of short oil payment from power distribution companies. In July, the Economic Coordination Committee approved proposals of the ministry of water and power to borrow Rs185 billion from a syndicate of local banks to set off liabilities of power distribution companies.

In FY2017, Pakistan International Airlines (PIA) accounted for a major share in PSEs’ debt in FY2017 with Rs122.4 billion, followed by Water and Power Development Authority (Wapda) with Rs81.4 billion. 

Debt of Pakistan Steel Mills (PSM) remained flat at Rs43.2 billion during the last fiscal year. Outstanding debt of Oil and Gas Development Company (OGDC) amounted to a meager Rs3.1 billion.

While OGDC and Wapda are profit-making entities, lose-making PSM and PIA keep relying on government cash injections and guaranteed loans to meet their recurring expenditures.   Analysts said restructuring and privatisation of unwieldy state-owned enterprises (SOEs) are the only way out for the permanent solution to the losses.

“Such SOEs are the liabilities for government,” an analyst said. “The persistent state support to such firms could affect public finances and economic growth.” The present government pledged with the International Monetary Fund, under its extended fund facility programme approved in 2013, to privatise or restructure at least 35 PSEs. The progress on privatisation, however, remained sluggish.

The government is building up debt to plug its funding gap. The massive losses incurred by the public sector enterprises are resulting in a wide fiscal deficit. The budget deficit accumulated to a hefty 5.8 percent of GDP in FY2017.

Pakistan’s total debt and liabilities surged to Rs25 trillion – 78.7 percent of GDP – in the last fiscal year compared with Rs22.5 trillion in the previous year.

Finance ministry data showed that the country’s total debt and liabilities amounted to Rs20.767 trillion in accordance with the definition of Fiscal Responsibility and Debt Limitation Act amended in June.

The central bank’s data further revealed that collective debt and liabilities of PSEs increased 32.6 percent to Rs1.052 trillion during the last fiscal year.