Public Private Partnerships (PPPs) have long been advocated by economists as a means to supplement the governments’ inadequate (federal and provincial) resources to meet major deficiencies in physical and social infrastructure.
In Pakistan, the problem is exacerbated by massive curtailment of the very limited budgeted allocation earmarked for Public Sector Development Programme (PSDP) at the end of the year as and when the deficit reaches unsustainable levels – a situation prevailing in the country for the past decade.
Reports suggest that between 1990 and 2019 there were 108 financially closed PPP projects with a total investment of 28.4 billion dollars. In 2021, parliament approved an amendment to the 2017 PPP law and established a Public Private Partnership Authority (PPPA), with all four provinces setting up a corresponding provincial authority, designed to streamline the approval process and provide policy guidelines for developing and implementing PPPs in three modes: Build-Operate-Transfer, Build-Own-Operate-Transfer or Design-Build-Finance-Operate-Transfer (DBFOT).
The selection of PPP rests with the government (federal or provincial) hence there is a political bias which explains why the bulk of the PPPs in Punjab focused on roads/flyovers (reflecting the priority accorded to this sector by the Sharif-led administrations) though projects in the pipeline are more diverse, perhaps reflecting Chief Minister Maryam Nawaz’s different priorities from those of her predecessors. These include student accommodation in public sector universities and colleges, 500-bed tertiary care hospital, establishment of time travel park, Lahore, foot and mouth disease vaccine production plant (Lahore) and agricultural production markets in various districts of Punjab.
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Sindh’s PPPs have been in multiple sectors including Thar water supply, NED Science & Technology Park, energy (Nooriabad power), and transport (Karachi-Thatta road). Khyber Pukkhtoonkhwa PPP projects during the Khan-led administration focus on tourism and the least developed province, Balochistan, has PPP projects in education, water, and energy using the DBFOT model.
There is a cost, a contingent liability associated with not only PSDP projects but also PPP projects and while the former is routinely calculated in the budget documents the latter was not calculated till this year as part of the ongoing International Monetary Fund (IMF) programme conditions.
Total outstanding guarantees for PSDP as per the budget documents for the current year were 3448 billion rupees as of end March 2025 (which exclude commodity operations due to their self-liquidating nature which stood at 1075 billion rupees – carried out by Trading Corporation of Pakistan, Pakistan Agriculture Storage and Services Corporation and provincial governments).
The government has pledged to limit the volume of new government guarantees issued during a financial year under Fiscal Responsibility and Debt Limitation Act, which stipulates that “the government shall not give guarantees aggregating to an amount exceeding two percent of the GDP in any financial year including those for rupee lending, rate of return, outright purchase agreements and other claims and commitments provided the renewal of existing guarantees shall be considered as issuing a new guarantee.” Be that as it may, in 2022 the government was forced to add 493 billion rupees to contingency liabilities to shore up the financial position of large poorly performing public entities including Wapda, PIA and NTDC.
PPP’s contingent liabilities are defined as potential financial obligations of the government associated with lawsuits or warranties that require disclosure in financial statements but are not recorded as a balance sheet liability; and may arise from multiple factors including contradictory regulations/overlapping policies that may delay project implementation, to political instability, inconsistent contract enforcement, and risk-sharing mechanisms.
Governance issues lead to cost over-runs – a usual reported occurrence in Pakistan – and also compromise the capacity of the project(s) to promote sustainable and inclusive growth.
The government has not agreed to any limit to the contingent liabilities; however, in the IMF October 2024 documents, uploaded on the Fund website, titled “Article IV Consultation and request for an Extended Arrangement Under the Extended Fund Facility” the government undertook to: “continue to implementPIMA (Public Investment Management Assessment) designed to evaluate infrastructure governance across public investment cycle to identify weaknesses, recommend reforms and improve efficiency and efficacy of public investment for growth, with and extension of C-PIMA (focused on climate resilience) action plans. By December 2024, we will produce a report detailing the outcomes of our review of all investment projects in the Public Sector Development Programme (PSDP).
The findings from this review will enable us to streamline the PSDP pipeline by developing a prioritization mechanism for existing projects, identifying those suitable for capping or cancellation.
Moreover, to enhance our project selection framework, we will publish on our website the criteria for the project selection including scorecard, detailing the weight assigned to each criterion and the methodology for calculating the score, along with an annual limit on the total size of new projects entering the PSDP portfolio (end-January 2025 structural benchmark). In developing these criteria and determining the annual limit, we will consult with the IMF to ensure alignment with the best international practices.
We are also committed to strengthening the governance and risk management frameworks for Public Private Partnerships (PPP), including to ensure that they are subject to the same project selection criteria as projects funded from other sources.
We are also committed to strengthening the governance and risk management frameworks for Public Private Partnerships (PPP), including to ensure that they are subject to the same project selection criteria as projects funded from other sources.”
Contingent liabilities are normally split into explicit (arising directly from contracts including minimum revenue guarantees, interest adjustment linked to KIBOR, foreign exchange pass through provisions, construction, and input costs escalation etc.) and implicit liabilities (non-contractual but politically or economically driven including tariff or user charges that create revenue gaps); however, the Ministry of Finance has not made a distinction in this regard which compels one to conclude that the cost of implicit liabilities is not included. Additionally, critics allege that the private partner in these projects is usually politically influential and hence the PPP has inadvertently strengthened rather than weakened the existing elite culture prevalent in the country.
Ministry of Finance, late December 2025, disclosed that 36 projects qualified as PPP (federal and provincial) with total public exposure for contingent liabilities at 368.3 billion rupees and financial guarantees of 104 billion rupees in its first fiscal risk monitoring framework for contingent liabilities of PPP projects.
The foregoing shows that due diligence must be exercised on all PPP projects and ideally the beneficiaries must be taken on board so that selection is not on the basis of political influence but on meeting the needs of communities that would be better served by local as opposed to provincial or federal governments.
Copyright Business Recorder, 2026