Pakistan’s latest debate over energy state owned enterprises looks like an accounting matter, but it is really a test of fiscal honesty and investor protection. The government is reportedly considering relief from International Financial Reporting Standards (IFRS) 9 and IFRS 14 for major energy state-owned enterprises (SOEs), including SNGPL, SSGCL, PSO, OGDCL, PPL and GHPL.
The concern is that full implementation may force recognition of expected credit losses of around Rs400 to Rs500 billion because receivables are trapped in the circular debt chain. Gas circular debt alone is reported at more than Rs3.4 trillion. Since the SOE Act 2023 allowed a transition period for IFRS compliance and that window has now effectively matured, the issue should be handled through a limited and time bound adjustment period, with proper disclosure, rather than through a broad exemption that weakens the reform objective.
The central issue is simple. Pakistan’s energy companies are carrying large receivables because government payments, tariff differentials, subsidies and inter corporate settlements are delayed. On paper, these amounts may appear recoverable. In practice, recovery depends on fiscal space, political decisions, tariff approvals and circular debt settlement plans. When the state delays payments to one entity, that entity delays payments to another. The result is not only a cash flow problem. It becomes a balance sheet problem and, for listed SOEs, an investor confidence problem.
