A new report by the Ministry of Finance has warned that the growing financial dependence of government institutions on the national treasury poses a serious threat to Pakistan’s economy.

According to the Central Monitoring Unit of the Ministry of Finance, the total volume of debts and liabilities of government institutions has crossed Rs9.5 trillion.

The report states that excessive reliance on government funding and guarantees is straining the national treasury and undermining long-term economic stability.

Oil, gas, power sectors drive debt surge

The Central Monitoring Unit revealed that expenditures and loans of government entities in oil, gas, electricity, and infrastructure sectors have reached Rs9,557 billion. This figure includes domestic and foreign loans, rollovers, and interest payments.

The power sector alone accounts for circular debt of Rs4.9 trillion, making it one of the biggest contributors to fiscal pressure.

Poor governance, political interference

The report identifies poor governance and political interference as major reasons behind the weak performance of government institutions. These factors, it says, have negatively affected efficiency, transparency, and financial discipline.

Government entities continue to depend heavily on state guarantees and recurring loans instead of generating sustainable revenue.

In just the first half of 2024, government institutions received financial assistance of Rs616 billion. The Central Monitoring Unit noted that continued borrowing by loss-making entities has significantly increased financial pressure on the state.

It warned that unchecked support to inefficient institutions is deepening fiscal vulnerabilities.

Subsidy delays, global price shocks

According to the report, delays in government subsidies have further deteriorated the financial health of state-owned entities. At the same time, fluctuations in global oil and gas prices have reduced revenues for energy-sector institutions.

Administrative weaknesses and systemic inefficiencies have also caused project delays and cost overruns, compounding losses.

Urgent reforms, risk management

The Central Monitoring Unit stressed that strengthening the credit risk management system is essential to reduce financial risks. It also recommended restructuring loss-making institutions and expanding public-private partnerships to ease the burden on public finances.

The report urged limiting the issuance of government guarantees and improving regulatory oversight across sectors.

The Unit cautioned that without immediate and meaningful reforms, Pakistan’s national financial stability will remain at serious risk. It emphasized that sustained inaction could further weaken the economy and increase dependence on public borrowing.