KwaZulu-Natal Finance MEC Belinda Scott made the admission while delivering the provincial budget for the Provincial Government.
“At this point I need to state that at this present moment this Province is not in a position to fund the Commonwealth Games, which is a national event," she said.
“Provincial Treasury has escalated this matter to the National Treasury for urgent national intervention, in order that National Government is made aware that they will need to make provision for funding this funding pressure.”
KwaZulu-Natal had originally promised to contribute ZAR580 million (£26 million/$38 million/€34 million) to help host the first Commonwealth Games to be staged in Africa but have now admitted that is not possible.
Scott's admission has heightened fears over early preparations for the event after the South African Sports Confederation and Olympic Committee (SASCOC) missed a deadline set by the Commonwealth Games Federation to establish an Organising Committee.
Gideon Sam, President of SASCOC, however, has claimed people should not be worried.
"As the Games are six years away, we have begun the process to engage with various stakeholders in order to meet our obligations as set out in our bid documents," he said.
"We have had discussions with National Government and this is ongoing.
"We are aware of the current economic environment, but we are confident that we will deliver on our obligations of hosting a world-class event on the African continent."
Durban 2022 has budgeted ZAR6.4 billion (£313 million/$481 million/€430 million) to stage the Games.
South Africa's Cabinet estimated that the Games could generate ZAR20 billion (£975 million/$1.5 billion/€1.4 billion) in output.
That would give the country's gross domestic product a boost of ZAR11 billion (£537 million/$827 million/€739 million) and provide employment opportunities for at least 11,500 people.
Tubby Reddy, chief executive of SASCOC, claimed they had already engaged the South African Government to ensure there would be enough financial support available.
“Negotiations with National Government and Treasury are on-going and we are guided by decisions taken at national level," he said.
"We have already secured many of the agreements with National Government and are working tirelessly to conclude any outstanding matters, including the issue of funding for the Games.
"We reaffirm that SASCOC will deliver a world-class Commonwealth Games that would make us all proud.
"Our partners in government are working with us to ensure that the first ever Games in Africa will be a memorable one”