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Pakistan’s State-run Enterprises Are The Worst

LAHORE: The World Bank has ranked Pakistan’s state-run enterprises as the worst in South Asia. According to the report, the losses of these institutions are increasing more than the value
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LAHORE: The World Bank has ranked Pakistan’s state-run enterprises as the worst in South Asia.

According to the report, the losses of these institutions are increasing more than the value of the assets, resulting in the loss of public resources and increasing risks. State-owned companies take 458 billion rupees annually from public funds to survive.

The World Bank urged Pakistan to introduce strong reforms to reverse this trend as the federal government is facing financial difficulties due to the deficit. These institutions have caused a financial loss equal to 0.5 percent of GDP since 2016.

Federal companies are among the least profitable entities in the South Asian region, with SOs’ deficit reaching 3.1 percent of GDP in 2020 due to persistent losses. Guarantees to SOEs, defined as debt stock and government debt, are increasing rapidly and are expected to reach 9.7 percent of GDP in 2021.

The burden of domestic, and external debt and guarantees is increasing rapidly with an average of 4.09% per annum from 2016 to 2021, requiring a detailed assessment of the temporary problems that have increased due to guarantees.

Also, Read: Drastic Increase In Pakistan’s Foreign Exchange Reserves

In 2021, 32% payable guarantees were given for nuclear power plants by Pakistan Atomic Energy Commission. Guarantees accounted for 44.4 percent of the total burden, while cash development loans and external borrowings stood at 36 percent and 19.6 percent, respectively.

Government guarantees to SOEs doubled compared to 2016, with over 75% of guarantees given to finance revolving credit to the power sector.

 

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