World Bank declares Pakistan's state-owned enterprises worst
Business
The government guarantees considered as loans for SOEs have doubled since 2016
LAHORE (Web Desk) - World Bank (WB) has declared Pakistan’s State Owned Enterprises as the worst companies in South-Asian region.
According to the report, the loss incurred by these institutions is getting more than their value, resulting in an increase in losses and risks for public assets. Government companies consume 458 billion rupees annually from public funds to keep themselves functioning.
The World Bank has urged Pakistan to introduce strong reforms to address this issue because the federal government is facing financial difficulties due to these losses. These institutions have been causing financial losses equivalent to 0.5% of GDP since 2016.
Federal companies are among the lowest-earning institutions in the South Asian region, and due to continuous losses, the SOEs loss was 3.1% of GDP in 2020. The guarantees given to SOEs are considered as loans and government debts, which is increasing rapidly, and it reached 9.7% of GDP in 2021.
The burden of local, foreign loans and guarantees has increased rapidly with an average of 4.09% annually from 2016 to 2021, and a detailed analysis of temporary issues that have caused an increase in guarantees is the need of the hour.
In 2021, the Pakistan Atomic Energy Commission gave 32% payable guarantees for nuclear power plants, resulting in a total burden of 44.4%, whereas the cash development loans and foreign loans accounted for 36% and 19.6%, respectively.
The government guarantees for SOEs have doubled since 2016, and more than 75% are the guarantees given to the energy sector to combat circular debt.
