The Ukraine war chief coercions to Pakistan’s economic outlook.

For the first time, the PML-N-led government has admitted that contract mismanagement during its previous tenure was a major source of current energy sector challenges. The PML-N-led government has identified domestic political uncertainty, the Russia-Ukraine war, higher provincial deficits, and significant losses and debts of state-owned enterprises (SOEs) as key risks to next year’s budget and medium-term macroeconomic outlook.

Finance Minister Miftah Ismail and Secretary Finance Hamed Yaqoob Sheikh have also highlighted a possible increase in expenditures due to higher subsidies and interest payments, as well as an anticipated setback in revenue collection due to import and demand contraction, posing significant risks to the federal budget in an integrity statement to parliament required under the Public Finance Act as part of the federal budget.

“The main reasons for the power sector losses include high generation costs due to more expensive technologies and poorly designed contracts, resulting in exorbitant profits for private investors and front-loading of debt repayments during the first ten years of plant operations, above-average transmission and distribution losses, and below-average recoveries of electricity bills,” the finance ministry said in a joint statement. As a result, the power sector is currently the largest recipient of government subsidies, according to the report.

According to the statement, Pakistan faced several fiscal risks, and significant effort was required to overcome or mitigate the potential negative effects of such risks.

“The silver lining is that the country has already made significant progress in certain areas, and a number of strategies are being implemented.”