Inapt subsidies result in theft, leakage: Aurangzeb

ISLAMABAD: Federal Minister for Finance Muhammad Aurangzeb said on Monday that billions of rupees were doled out in the shape of inappropriate subsidies, resulting in theft, leakage, and corruption.

The government, he said, moved towards right-sizing and closed down certain departments, including USC, Passco, and the government will do more in the days to come. In his televised speech, the minister said that the government identified 26 SOEs for privatisation, including ZTBL, HBFC, and five power distribution companies. About SOEs’ losses, he said aggregate annual losses of loss-making SOEs declined for three consecutive fiscal years, as it stood at Rs905 billion in FY23, dropped to Rs851 billion in FY and Rs832 billion in FY25.

This represents an 8 percent reduction over two years, averaging approximately 4 percent annual improvement. From FY23 to FY25, losses declined by Rs74 billion - equivalent to approximately Rs142 million per day saved over the period.

The widely cited ‘300 percent increase’ does not refer to aggregate losses of loss-making SOEs. It refers to the net portfolio result, which combines profits of profit-making SOEs and losses of loss-making SOEs, said the minister.

In FY25, oil & gas sector profits declined due to lower global oil prices, reducing the profit buffer and mechanically widening the net portfolio outcome - even though operational losses improved. This is an accounting aggregation effect, not a deterioration in SOE performance.

The government supports, he said, provided Rs2078 billion in FY25 while inflows from the SOEs stood at Rs2119 billion in shape of dividends, taxes and interest, so the net effect hovered around Rs40 billion.

Total SOE portfolio debt stands at approximately Rs9.57 trillion, representing accumulated multi-year liabilities including circular debt stock, re-lent foreign loans, development loans, bank borrowings, and accrued interest.

The government of Pakistan has executed a historic Rs1.275 trillion circular debt settlement through structured financing, clearing major liabilities and significantly reducing the circular debt stock without imposing additional new burden on consumers.

The government has taken bold, long-delayed structural decisions to permanently stop recurring losses as PASSCO, USC were closed down while SME Bank was liquidated. The PIA and First Women Bank Limited (FWBL) were privatised and now ZTBL and HBFC were under active privatisation. There are five Discos at advance stage of privatisation.

The government of Pakistan now maintains a standardised, 360-degree view of SOEs, covering financial performance, debt exposure, unfunded liabilities, governance compliance, and operational KPIs.

The losses and liabilities existed previously; however, reporting was irregular and discontinued after 2019. The government has revived consolidated reporting, cleared the backlog, and institutionalised regular frequency, timelines, and public disclosure to ensure transparency and accountability. Today, both government and the public are better informed than ever before as over 50 percent of SOE board members are independent, mandatory external audits in place, governance scorecards track compliance and performance.

Legacy structural challenges do exist. However, the data demonstrates declining operational losses, positive net fiscal contribution, major circular debt stabilisation, enhanced transparency, and structural reforms already in execution.

Pakistan’s SOE reforms are grounded in transparency, data integrity, and accountability. Regular, timely, and consolidated reporting ensures that government, Parliament, stakeholders, and the public are fully informed. Transparency does not create losses — it reveals them. What distinguishes the present framework is disciplined reporting, corrective action, and structural reform, he concluded.