Upcoming IMF review Pakistan can no longer delay SOE reform

September 11, 2026 (MLN): Pakistan’s state-owned enterprise (SOE) problem is no longer a question of diagnosis. It is a question of economic cost. For years, governments have identified loss-making enterprises, announced restructuring plans and considered privatization. Yet the financial burden has remained. In FY2025, 25 loss-making SOEs recorded combined losses of Rs832.8 billion.

Profit-making SOEs generated Rs709.9 billion, but the sector still recorded a net adjusted loss of Rs. 122.9 billion, compared with Rs. 30.6 billion in FY2024. (Finance Division, Federal SOEs Annual Aggregate Report FY2025).

These numbers matter beyond individual balance sheets. Pakistan is pursuing fiscal consolidation, revenue mobilization and efforts to contain fiscal risks. At the same time, the government continues to carry enterprises that consume public resources without generating an adequate economic return. The issue, therefore, is not simply how much SOEs are losing. It is how much the country is losing by delaying decisions about them.

Pakistan’s fourth review under the International Monetary Fund (IMF) Extended Fund Facility is scheduled for September 15, 2026, based on end-June 2026 performance. SOE reform is part of the broader programme to reduce the state’s commercial footprint, strengthen governance and contain fiscal risks. The review provides an opportunity to ask a more practical question: what has changed, what remains unresolved and when will taxpayers see the benefit? (IMF, Pakistan: Third Review Under the Extended Fund Facility, May 2026)

Beyond the annual loss 

The Rs. 832.8 billion loss is only the most visible part of the problem. The wider cost can include government support, guarantees, accumulated liabilities, financing costs and the opportunity cost of scarce public capital.

Government support to SOEs rose 37% to Rs. 2.078 trillion in FY2025. SOE debt stood at Rs. 9.571 trillion, while unfunded pension liabilities were Rs. 2.030 trillion and government guarantees stood at Rs. 2.164 trillion. These figures show why SOE reform cannot be judged only by annual profit and loss: the fiscal risk also sits in debt, guarantees, pensions and continuing government support. (Finance Division, Federal SOEs Annual Aggregate Report FY2025).

At the same time, the fiscal relationship is more complex than simply adding up government support. SOEs contributed Rs. 2.119 trillion to the government in FY2025, producing a reported net flow to government of Rs. 40.7 billion. The concern, therefore, is not that every SOE is a fiscal drain, but that substantial public support and large liabilities remain concentrated in parts of the portfolio. (Finance Division, Federal SOEs Annual Aggregate Report FY2025). 

The SOE sector generated approximately Rs. 12.4 trillion in revenues in FY2025. But size does not, by itself, justify continued state ownership. The relevant question is whether an enterprise has a clear economic, strategic or public-service reason to remain under government control. (Finance Division, Federal SOEs Annual Aggregate Report FY2025).

The lesson is important. Accumulated losses should not automatically be treated as evidence that an enterprise is currently commercially unviable. They reflect the financial history of an Organisation. Current operating performance, future investment requirements, service obligations and the case for continued state ownership also matter. 

For policymakers, however, these figures demonstrate the financial legacy that has built up over time. The question should be whether continuing with the existing ownership model is likely to create more value than restructuring or private participation. This is where Pakistan should begin measuring the cost of delay. For major SOEs, the government could publish annual losses, government support, additional liabilities and the expected fiscal benefit from a restructuring, privatization or winding-up decision. That would make the cost of waiting visible.

From reform architecture to results

Pakistan has already developed much of the institutional framework needed for SOE reform. The government has been strengthening the Central Monitoring Unit, requiring commercial SOEs to prepare business plans and Statements of Corporate Intent, and improving board governance. In August 2026, the Finance Division issued Directors Appointment and Evaluation Guidelines for SOEs. (Finance Division, Government of Pakistan).

These are useful steps. But governance reforms ultimately matter because they improve decisions and performance. A better board is not, by itself, a fiscal saving. A business plan is not a reform outcome unless it changes the performance of the enterprise.

For commercially oriented SOEs, board and management appointments should therefore be linked to measurable financial and operational targets, with performance reviewed against agreed milestones. Independent directors are necessary, but accountability for results must also be clear.

Every major SOE under reform therefore needs a clear decision and a clear timeline. The options are not limited to privatization. Depending on its role and future viability, an enterprise could be retained and reformed, restructured, privatized, outsourced, merged or wound up. The important point is that the decision should be based on economic logic rather than institutional inertia.

The government has also begun categorizing SOEs according to financial sustainability and reviewing their financial and non-financial performance. The next step is to connect these assessments with measurable outcomes. For major SOEs, the government should establish a three-year reform plan with annual targets for losses, government support, debt reduction, operational efficiency and, where applicable, private participation. Progress should be published and tracked rather than left to broad reform commitments.

For each major SOE under reform, the public should be able to see a small set of indicators: financial performance, government support, debt and guarantees, reform milestones, management accountability and the expected date for achieving the agreed outcome.

The distinction between public-service obligations and commercial losses is equally important. Where the government requires an SOE to provide a service for public-policy reasons, that obligation should be clearly defined, costed and transparently budgeted. Commercial losses should not be allowed to remain hidden within a broader claim of public service. Pakistan already has a Public Service Obligations Costing framework for SOEs; the priority now is effective implementation. (Finance Division, Government of Pakistan).

SOE reform should also address preferential treatment in public procurement. Where commercially oriented SOEs receive contracts without effective competition, the government should ensure that exceptions are narrowly defined, transparently disclosed and justified by a genuine public-interest requirement. Otherwise, state ownership can create an uneven playing field for private firms. 

PIA as a test of execution

The recent experience with Pakistan International Airlines Corporation Limited (PIACL) is important because it shows that a difficult SOE transaction can move from policy discussion to implementation.

Following the first financial closing in June 2026, management control of PIACL was transferred to the investor consortium led by Arif Habib Corporation Limited. The transaction involved a total investment commitment of Rs. 180 billion, including Rs. 55 billion for the government and Rs. 125 billion in fresh equity for PIACL. At the first closing, Rs. 10 billion was paid to the government and Rs. 80 billion was injected as fresh equity, with a further Rs. 45 billion investment commitment scheduled for the second closing. (Privatization Commission, Government of Pakistan, June 2026).

The significance of PIA is not simply the transaction itself. It is whether the process provides a model that can be applied to other enterprises.

The government is progressing other transactions, including work involving power distribution companies and airport outsourcing. The Privatization Commission has advanced the first batch of DISCO transactions involving FESCO, GEPCO and IESCO, with investor participation and due-diligence processes under way. But the number of transactions should not become the main measure of success. (Privatization Commission, Government of Pakistan, 2026).

The real test is whether each restructuring or transaction reduces the fiscal burden, improves efficiency and creates better conditions for private investment. This is where SOE reform becomes a wider economic reform. Reducing the government’s commercial footprint can create space for private capital, improve competition and allow public resources to move towards areas where the state has a stronger economic role. For Pakistan, the implications extend beyond fiscal management. A more efficient allocation of capital can support investment, productivity and export competitiveness.

From commitments to results

Pakistan does not lack awareness of the SOE problem. It has policies, institutions, governance reforms and an active privatization programme. The harder task is execution.

The September 15 IMF review should therefore be seen as an opportunity to demonstrate measurable progress, not simply commitments.

Five questions should guide the next phase of SOE reform: How much public money will be saved? How many losses will be eliminated or reduced? How much private investment will be unlocked? How much will efficiency and service delivery improve? And when will taxpayers see the results?

These questions matter because reform has a time dimension. An enterprise that continues to lose money while waiting for a decision does not stand still. Losses accumulate, liabilities can increase and the opportunity cost grows.

Pakistan should therefore measure not only the cost of reform, but also the cost of waiting. The objective should not simply be to sell SOEs. Nor should it be to keep them under government ownership at any cost. The objective should be to determine where the state adds economic value, where it does not, and how quickly resources can be moved towards more productive uses.

That is the real economic test of SOE reform. The country has spent years discussing what should be done with its SOEs. The priority now is simpler: make the decisions, implement them and measure the results.

About the Author

[Shahid Anwar is an Economic Analyst and Business & Trade Advisor, and former Secretary General of the Federation of Pakistan Chambers of Commerce & Industry (FPCCI). He also served as Senior Director Research at the Institute of Cost and Management Accountants of Pakistan (ICMAP), with 36 years of experience in economic, business and trade affairs. He provides advisory support on trade, investment and business partnerships. 

Disclaimer:

The above analysis/article is for informational and educational purposes only.