Pakistan's federal budget faces an existential threat, not from external shocks alone, but from the catastrophic financial hemorrhage of various state-owned enterprises (SOEs). These entities incurred losses of Rs851 billion during FY24, and total SOE losses now exceed Rs5.8 trillion, or about one-third of the recently passed Rs17.5 trillion federal budget. SOE bailouts cost taxpayers Rs1.58 trillion in FY24, more than the entire PSDP for FY26. The scale of the losses should generate outrage — about Rs1.9 billion a day is being squandered to keep the SOEs alive, and most of these SOEs do not even deliver services of acceptable quality.
It is not that SOEs must make profits, as long as their service delivery is acceptable, because adding profit motives to their work can be disastrous in its own right — water companies in most countries are loss-makers but do provide clean water. In the 35 years since England privatised its water companies, the sector is in disarray as new owners did make them profitable by raising tariffs, but then tried to pocket all the revenue without reinvesting.
Today, many companies are barely afloat, and UK consumers are paying billions of pounds more than they would have if the companies were not privatised. Thus, privatising Pakistan's water supply companies would not improve service quality — which is already atrocious — but would also raise consumer prices.
However, the power sector has been successfully privatised in several countries, with the government's role limited to providing a quality regulatory regime. Here, despite billions in subsidies, power distributors are perhaps the biggest drain on the exchequer.
Pakistan cannot thrive if the billions needed to improve health and education are instead being set on fire to keep SOEs afloat. The pace of privatisation needs to be accelerated — behind all the focus on PIA, several other parasitic state 'assets' need to go. Corporate governance and operational reforms that lead to their sale are the price Pakistan must pay for its economic survival.
