Market Pulse

SOE support rises as power-sector risks persist

The federal SOE review for July–December 2025 reported Rs423.3 billion of aggregate profit at profitable entities and Rs342.8 billion of losses at loss-making entities, leaving net adjusted profit at Rs80.5 billion. Government support reached Rs804 billion, while the review flagged circular debt and operating weaknesses in power and infrastructure as continuing fiscal risks.

Market impactThe figures strengthen the case for fiscal discipline and utility reform. Power-chain liquidity remains the clearest vulnerability, while banks and energy suppliers face second-order exposure through sovereign funding, receivables and working capital.

Tight oil supply and LNG disruption keep the fuel mix costly

OPEC+ kept November production targets unchanged on October 4 while Gulf output remained below quota and Brent stayed above $100 per barrel. Pakistan’s constrained LNG supply has increased furnace-oil use for power generation; at least 800 MW was being generated on furnace oil at peak, and July–August fuel-oil generation was materially above a year earlier.

Market impactUpstream producers retain earnings support and marketers gain a furnace-oil volume channel, but higher import costs, inventory funding and power-sector receivables weaken cash conversion across the energy chain.

Inflation and money-market rates limit rapid easing

September CPI inflation was 10.26% year on year and 1.27% month on month. The SBP policy rate remains 11.5%; on October 5, KIBOR offer rates were 11.97% for three months, 12.39% for six months and 12.68% for twelve months, while SBP reserves stood at $21.44 billion as of September 25.

Market impactBanks retain near-term asset-yield support and the reserve buffer reduces immediate currency stress, but financing conditions remain restrictive for leveraged industrial and consumer-facing businesses.

Cement demand recovery broadens, led by southern mills

September cement despatches increased 5.95% year on year to 4.621 million tonnes, with domestic despatches up 7.35% to 3.788 million tonnes. South-based mills recorded a 30.23% increase in total despatches, while first-quarter FY27 industry volumes rose 3.88%.

Market impactVolume recovery improves operating leverage, particularly for southern capacity and export-capable producers. Energy volatility, costly financing and uneven regional utilization remain the principal margin constraints.

The SOE review confirms that power remains the most important fiscal and liquidity fault line. LNG disruption is also pushing generation toward costlier furnace oil, increasing fuel-financing requirements and the risk that delayed recoveries propagate through the energy chain.

ConstraintRestored contracted LNG supply, stronger hydel output, credible tariff recovery or faster circular-debt settlement would reduce the stress.

An 11.5% policy rate and KIBOR above the policy rate protect near-term reinvestment yields, while higher reserves limit immediate currency pressure. The sector remains comparatively resilient over the next few quarters.

ConstraintSOE financing needs and power-chain receivables can crowd out private credit and weaken exposed borrowers; faster disinflation would also compress asset yields.

Unchanged OPEC+ targets, below-quota Gulf supply and Brent above $100 sustain upstream realizations. Domestic producers remain a direct earnings hedge against Pakistan’s imported-energy shock.

ConstraintA geopolitical de-escalation, emergency-stock releases or recovering Gulf exports could lower oil prices quickly; domestic production decline and circular-debt receivables still constrain cash conversion.

Furnace-oil substitution creates a meaningful volume opportunity for distributors with import and storage infrastructure. The same shift, however, raises inventory funding and exposes marketers more heavily to power-sector payment delays.

ConstraintRegulated margins may not compensate promptly for financing costs, and normalization of LNG deliveries could reverse the temporary furnace-oil volume uplift.

September’s domestic despatch growth and stronger southern volumes indicate that demand recovery is gaining breadth. Producers with southern capacity, export access and energy flexibility have the clearest operating-leverage opportunity.

ConstraintHigh coal, power, freight and financing costs can absorb volume gains, while northern exports and industry utilization remain uneven.