Bank lending to state-run firms jumps to Rs282bn

Credit to public sector enterprises (PSEs) soared to Rs282 billion in the first 10 months of the current fiscal year compared to just Rs14bn in the same period of last year reflecting the extremely poor financial health of the state-run companies. Data issued by the State Bank of Pakistan on Tuesday showed the growth of credit to PSEs was abnormally high compared to previous years’ net withdrawal of Rs43bn at the end of FY22 and Rs53bn in FY21. Bankers said the flow of loans reflects the critical economic conditions of these state-run enterprises. Most of the PSEs were incurring losses for many years and the government keeps them floating with taxpayers’ money. A senior banker said that the loss-making Pakistan International Airlines (PIA) accounted for the lion’s share in overall bank lending to PSEs. The national carrier has been incurring losses for the last more than a decade but the Covid-19 and skyrocketing oil prices have further deteriorated its financial health. However, the banker did not disclose the amount borrowed by the PIA during July-April FY23 but said power sector companies were also borrowing heavily due to losses. Despite a massive hike in tariffs, the power sector companies’ losses continued rising mainly because these companies failed to receive the due amounts from their jurisdictions.