The Ministry of Finance has introduced Pakistan’s first-ever Fiscal Risk Monitoring Framework (FRMF) to track contingent liabilities and financial guarantees associated with Public-Private Partnership (PPP) projects. This initiative, designed to enhance transparency and improve fiscal planning, reveals that the country’s public sector currently faces Rs472.3 billion in fiscal exposure from PPP-related contingent liabilities and guarantees, according to a report by Business Recorder.
The framework, developed by the Debt Management Office, aims to establish a consistent system for identifying, quantifying, and reporting contingent liabilities at both federal and provincial levels. This includes risks that might arise from PPP projects but are not immediately reflected in budget or debt statements. Such liabilities can materialise later due to guarantee calls, revenue support mechanisms, or adjustments linked to inflation or currency fluctuations.
The total fiscal exposure includes Rs368.3 billion in contingent liabilities and Rs104 billion in funded financial guarantees, based on provisional estimates as of December 2025. These figures cover 36 PPP projects across the federal government and all four provinces, which will now be regularly disclosed in the Fiscal Risk Statement (FRS) and debt reports.
The framework categorises liabilities into two types: direct and contingent. Direct liabilities, which are contractually fixed, include obligations such as viability gap funding (VGF) or annuity payments.
Contingent liabilities, on the other hand, depend on specific conditions, such as minimum revenue guarantees or cost escalations. Contingent liabilities are further classified into explicit and implicit categories. Explicit liabilities arise directly from PPP contracts, while implicit liabilities are non-contractual but politically or economically driven.
The framework introduces a qualitative probability rating system—Low, Medium, or High—for each contingent liability, based on observable factors like past guarantee calls, demand volatility, and tariff adjustments. The system also ensures transparency by requiring agencies to justify their ratings with written explanations.
In addition to tracking contingent liabilities, the framework mandates that funded guarantees, such as letters of credit or payment guarantees, be reported at their maximum nominal value. As of December 2025, these guarantees amount to Rs104 billion, a figure that will now be regularly included in national fiscal reports.
The new system aims to improve fiscal planning and reduce the risk of unexpected financial shocks due to PPP-related liabilities. The Federal Risk Management Unit (RMU) will maintain a National PPP Liabilities Tool and Dashboard, offering detailed data on project-wise, provincial, and sectoral fiscal exposure. The framework is expected to provide a clearer picture of the financial risks posed by PPP projects, enhancing the government’s ability to manage long-term fiscal stability.
