The crisis of State-Owned Enterprises (SOEs) in Pakistan has moved far beyond the realm of technical inefficiency and entered the territory of structural economic failure. According to the Ministry of Finance’s Annual SOE Performance Review and recent IMF staff reports, Pakistan’s SOEs generated losses of Rs 833 billion in FY 2024-25, while their combined profits stood at only around Rs 435 billion, leaving the public exchequer with a net fiscal burden of nearly Rs 398 billion in a single year. This figure alone exceeds the federal allocations for several key social sectors combined. In an economy already constrained by stagnant growth, rising poverty, and chronic balance-of-payments crises, this scale of fiscal leakage is not just inefficient; it is economically and morally indefensible.
The distribution of losses is neither accidental nor new. The National Highway Authority recorded losses of Rs 295 billion, Quetta Electric Supply Company Rs 112.7 billion, PESCO Rs 92.7 billion, Pakistan Railways Rs 60 billion, National Power Parks Rs 46 billion, Neelum-Jhelum Hydropower Rs 29.4 billion, Pakistan Steel Mills Rs 26 billion, Pakistan Post Rs 19.3 billion, and PASSCO Rs 19 billion, with multiple power distribution companies collectively draining tens of billions more. These numbers closely mirror the previous year’s total losses of Rs 851 billion, demonstrating that the crisis is systemic rather than episodic. No private firm could survive such sustained deficits. Only a sovereign state, shielded from market discipline and financed by taxpayers and lenders, can.
Yet the same dataset also reveals a crucial insight. A limited number of enterprises continue to perform well: OGDCL earned Rs 170 billion, Pakistan Petroleum Rs 90 billion, WAPDA Rs 56.7 billion, Government Holdings Rs 48 billion, Karachi Port Trust Rs 35.5 billion, and Port Qasim over Rs 35 billion. The pattern is revealing. Enterprises operating under relatively commercial frameworks and weaker political interference outperform those embedded in patronage networks, price controls, and politically motivated employment structures. The problem, therefore, is not simply public ownership; it is governance failure.
This conclusion aligns with the long-standing position of the International Monetary Fund, the World Bank, and leading academic economists such as Joseph Stiglitz and Daron Acemoglu. Their research consistently shows that state ownership can be justified only in limited contexts: natural monopolies, strategic infrastructure, or essential public utilities. Even in these cases, success depends on institutional autonomy, professional management, transparent regulation, and hard budget constraints. Pakistan’s SOEs violate almost all these principles simultaneously. Boards are politicised, senior appointments reflect political loyalty rather than competence, pricing is distorted by populist considerations, and repeated bailouts remove any incentive for efficiency. The real political economy of SOEs is rarely acknowledged openly. These entities persist not because they deliver value, but because they function as employment machines, patronage networks, and vote banks. Trade unions, provincial elites, political parties, and even segments of the security establishment benefit from control of these institutions. Overstaffing is not an accident; it is a feature. Losses are not a failure; they are a mechanism through which public money is redistributed to politically organised groups. In this sense, SOEs are not economic institutions but political instruments financed by taxpayers who have no voice in their governance.
The state is deeply embedded in sectors where it has no comparative advantage and largely absent from areas where its presence is essential: education, healthcare, infrastructure, technological development, and institutional capacity.
International comparisons further expose Pakistan’s anomaly. In the United Kingdom, railway infrastructure remains publicly owned, but train operations are undertaken by over thirty private companies competing for routes, performance targets, and service quality. The state regulates safety and access but does not operate trains. In Pakistan, the state simultaneously owns the tracks, runs the trains, sets the fares, employs the staff, and absorbs the losses. Accountability dissolves because the regulator and the operator are the same entity.
Globally, successful states have redefined their economic role. Saudi Arabia and the UAE deploy state capital in future-oriented sectors: renewable energy, logistics, artificial intelligence, advanced manufacturing, and digital services. Their sovereign funds invest in productivity and innovation. Pakistan deploys state capital to keep obsolete business models alive: loss-making railways, idle steel mills, dysfunctional power distributors, and procurement agencies that distort agricultural markets. One model builds the future; the other finances stagnation.
The opportunity cost is devastating. A net annual fiscal drain of nearly Rs 400 billion could fund universal primary education, nationwide digital infrastructure, renewable energy grids, medical research, export credit agencies, and large-scale startup financing. Instead, it pays for trains that run empty, power companies that cannot bill or collect, and factories that produce nothing. In a society where parents must choose between feeding their children and sending them to school, this is not merely bad economics; it is a moral failure of governance.
Recent policy incoherence further illustrates the depth of the problem. The solar net-metering framework was introduced without credible fiscal modelling, allowing returns of up to 50% on equity, only for the government to later declare these returns excessive and propose reductions to 37%. The same state that mispriced energy, failed to hedge currency risk, and ignored inflation now blames investors for exploiting incentives it designed itself. Over the last decade, the rupee has depreciated more than threefold, energy tariffs have risen by over 300%, and real inflation has exceeded 40%, yet policy continues to be reactive, arbitrary, and politically driven.
Opponents of privatisation often raise legitimate concerns about job losses, social instability, and the risk of private monopolies. These risks are real and require strong regulatory institutions, competition policy, and social safety nets. However, fiscal collapse is a far greater threat. Unsustainable SOEs do not preserve employment in the long run; they destroy it by crowding out private investment, increasing public debt, and eroding macroeconomic stability. A shrinking economy cannot protect workers, regardless of ownership structure.
Reform, therefore, must be differentiated and sequenced, not ideological. Pakistan Railways should be unbundled into publicly owned infrastructure with privately operated services. Power distribution companies should be regionalised and auctioned under independent regulatory oversight. Pakistan Steel should be liquidated. PASSCO’s role in procurement should be phased out in favour of competitive agricultural markets. Airlines, insurance firms, and commercial banks should be fully privatised. Strategic utilities, where state ownership may be retained, must be corporatised with independent boards, audited accounts, and legally enforced budget constraints.
Ultimately, Pakistan’s crisis is not a crisis of resources but of political courage. The state is deeply embedded in sectors where it has no comparative advantage and largely absent from areas where its presence is essential: education, healthcare, infrastructure, technological development, and institutional capacity. Political parties avoid reform because SOEs provide votes, jobs, and rent-seeking opportunities. But leadership, by definition, means making decisions that are unpopular in the short term but indispensable in the long term.
Pakistan now faces a binary choice. It can continue to behave like a failing conglomerate, managing decline through bailouts, borrowing, and populist pricing. Or it can redefine itself as a developmental state that regulates markets, invests in public goods, and allows private enterprise to generate growth. There is no third path. The question is no longer whether reform is necessary, but whether Pakistan’s political leadership is willing to confront the interests that profit from failure and finally govern an economy instead of merely subsidising its collapse.
The writer is a political economist and policy strategist shaping discourse on principled leadership, economic sovereignty, and long-term governance.