KARACHI: The loss-making public sector enterprises (PSEs) borrowed 36 per cent more from the banks in the outgoing fiscal year over the preceding year.

The State Bank of Pakistan (SBP) latest report shows that the banks’ lending to the PSEs jumped to Rs329.7 billion in 2018-19, which was a record borrowing in a single year. In FY18 it was Rs245bn and Rs254bn in FY17.

The total PSEs borrowing reached Rs1.068 trillion by the end of FY18.

When it came into office, the PTI government initially talked about creating a “Sovereign Wealth Fund” that they called the Sarmaya Company, under which all state-owned entities would be collected. The argument at the time was that the only reform these companies need is improved governance, a key ingredient of which was the separation of influence from the line ministries.

The government incorporated the company and even appointed a board of directors which went on to elect a chairman.

More recently, however, the new finance minister said that the government will take a careful look at all the PSEs and decide which ones need to be retained and turned around and which ones need to be privatised outright. That list is to be prepared by the end of the year. Today most members of the board of the Sarmaya Company (including the chairman) have stepped down.

Recently, the railways minister claimed for increased income but it is still making huge losses. The previous railways minister who remained all-in-all during the five-year term could not make it profitable.

The previous government provided Rs20bn bailout package to support the national flag carrier, but it never came out from the losses. Pakistan Interna­tional Airlines depends hugely on borrowing from banks and support from the government.

In 2016, the former finance minister said that 26 per cent shares of the PIA would be sold but was unable to complete the transaction due to stiff opposition from the unions and the opposition parties. The commitment to privatise PIA was made under an agreement with the IMF.

However, the latest package of IMF programme has yet not disclosed any kind of such condition regarding the privatisation. The IMF has always been critical about the loss-making state entities and kept asking governments to get rid of them.

However, the PTI government like previous ones finds it a difficult to sell out these loss-making entities due to political consideration as privatisation of these PSE may render a large number of people jobless.

State Bank’s Statistical Bulletin for July stated that PIA had the largest debt of Rs156.9bn until March followed by Wapda with Rs88bn and Pakistan Steel with Rs43.2bn.

Published in Dawn, July 7th, 2019