By Moaaz Manzoor

Pakistan’s public sector enterprises (PSEs) reduced their outstanding domestic debt to Rs2.03 trillion by the end of March 2026, reflecting some easing in borrowing pressures despite continued financial liabilities across the state-owned sector, according to data released by the State Bank of Pakistan (SBP).

The latest SBP data showed total PSE debt declined to Rs2.030 trillion in March 2026 from Rs2.068 trillion in December 2025 and Rs2.107 trillion in March 2025.

On a year-on-year basis, PSE debt contracted 3.61 percent in March 2026 compared with growth of 1.18 percent recorded in March 2025.

The moderation in debt levels suggests borrowing pressures eased somewhat during FY2025-26 amid improving macroeconomic conditions and lower financing costs.

According to the SBP figures, PSE debt had already started moderating during earlier quarters of the fiscal year. Outstanding debt declined from Rs2.016 trillion in June 2025 to Rs2.009 trillion in September 2025 before rising slightly to Rs2.068 trillion in December 2025 and easing again by March 2026.

Despite the decline in debt stock, overall liabilities of PSEs continued to increase.

PSE liabilities rose to Rs895.12 billion in March 2026 from Rs886.50 billion in December 2025 and Rs853.83 billion in March 2025.

As a result, the combined debt and liabilities of PSEs stood at Rs2.926 trillion by March 2026, compared with Rs2.954 trillion in December 2025 and Rs2.961 trillion in March 2025.

At the same time, year-on-year growth in total PSE debt and liabilities turned negative at 1.17 percent in March 2026 after recording positive growth of 6.27 percent a year earlier.

The latest figures indicate that while direct borrowing by state-owned entities slowed, broader financial obligations within the sector remained elevated.

PSEs have long remained a major source of fiscal pressure due to recurring losses, operational inefficiencies and weak governance structures.

The energy sector, particularly power-sector entities, continues to fuel circular debt accumulation and generate contingent liabilities for the government.

Although the latest SBP dataset did not provide individual debt figures for entities such as WAPDA, PIA, Pakistan Steel Mills and OGDCL, these organisations remain among the country’s most closely watched state-owned enterprises because of their historical fiscal impact.

The latest figures underline the importance of governance reforms, operational restructuring and stronger financial discipline across public enterprises to contain long-term fiscal risks.

Going forward, sustained improvement in PSE finances will depend not only on lower borrowing costs but also on improving operational efficiency, reducing losses and strengthening the commercial viability of state-owned enterprises.

Credit: INP-WealthPk