Pakistan’s oil and gas circular debt climbs to PKR 4.9 trillion

Pakistan’s oil and gas sector circular debt has risen to PKR 4.9 trillion, while losses across state-owned enterprises (SOEs) have reached PKR 5.8 trillion, highlighting persistent structural inefficiencies.

Finance Minister Muhammad Aurangzeb has reaffirmed the government’s commitment to improving governance, efficiency, and financial discipline in public sector entities.

Chairing a meeting of the Cabinet Committee on State-Owned Enterprises (CCoSOEs) today, the minister stressed the importance of aligning business plans with national priorities and addressing operational challenges in a timely and coordinated manner.

Federal Minister for Power Sardar Awais Ahmed Khan Leghari, Minister for Maritime Affairs Muhammad Junaid Anwar Chaudhry, Minister for Science and Technology Khalid Hussain Magsi, and senior officials from relevant ministries and divisions attended the meeting.

The committee heard a detailed briefing from the Central Monitoring Unit of the Finance Division on a biannual report on Federal SOE performance covering the period from July 2024 to December 2024.

The report included a detailed overview of the state of affairs and key challenges confronting state-owned enterprises (SOEs), including cumulative losses amounting to PKR 5.8 trillion, with PKR 342 billion incurred in just six months.

The committee was informed that circular debt in the oil, gas, and power sectors had crossed PKR 4.9 trillion, severely affecting cash flows and asset valuations.

The government’s fiscal support to SOEs -- through grants, subsidies, loans, and other injections -- had also exceeded PKR 600 billion in six months, equivalent to nearly 10% of total revenue receipts. In addition, unfunded pension liabilities in DISCOs and other SOEs, estimated at PKR 1.7 trillion, remain off the books -- as do the pension obligations of Pakistan Railways, the meeting was told.

It was also highlighted that government guarantees currently stand at PKR 2.2 trillion, while rollover costs and financial restructuring liabilities further compound fiscal pressures.

Governance concerns persist, with low levels of transparency in beneficial interest disclosures under IFRS Section 30 and other compliance gaps. The lack of strategic alignment in business plans and operational inefficiencies across SOEs were identified as critical areas requiring urgent reform.

The Cabinet Committee noted with concern the staggering cumulative losses of SOEs amounting to PKR 5.8 trillion, with PKR 342 billion incurred in just the last six months -- equating to a daily loss of PKR 1.9 billion.

The chair emphasized that issues such as inefficiencies in DISCO operations, slow network upgrades by NTDC, unfunded pension liabilities, and low governance standards continue to erode fiscal space and undermine investor confidence.

The chair also stressed the importance of timely reforms, particularly in the power and energy sectors where circular debt has crossed PKR 4.9 trillion, and reiterated the government’s resolve to bring greater transparency, financial discipline, and accountability to the SOE landscape.

He further emphasized that directors representing the government on the boards of state-owned enterprises must exercise due diligence and play an active role in safeguarding the financial health and operational performance of these entities through informed and responsible input.

During the meeting, separate summaries submitted by the Power Division were discussed and approved. These included:

• Appointment of Chairman on the Quetta Electric Supply Company (QESCO) Board
• Constitution of the Board of Directors of the Independent System Market Operator (ISMO)
• Appointment of Independent Director/Chairman on the Board of Gujranwala Electric Power Company (GEPCO)
• Appointment of Independent Director on GENCO Holding Company Limited (GHCL)
• Nomination of Independent Directors on the Board of Multan Electric Power Company (MEPCO)
• Nomination of Independent Directors on the Board of Power Information Technology Company (PITC)
• Constitution of the Board of Energy Infrastructure Development and Management Company (EIDMC)

Additionally, a summary moved by the Ministry of Railways for the winding up of three railway companies -- RAILCOP, PRACS, and PRFTC -- was also discussed and approved.