Malik Ghulam Muhammad was born near Mochi Gate, Lahore to a wealthy family on 20 April 1895. He belonged to the Kakazai tribe of Pashtuns. He was raised in the walled city of Lahore, and had his early education from a local high school. He was awarded a Bachelor of Accountancy from Aligarh Muslim University, where he also studied economics.
After graduating from Aligarh Muslim University, he co-founded Mahindra and Mohamed Steel Company in India with JC Mahindra and KC Mahindra (The Mahindra Brothers). The company later started manufacturing Willys jeeps in Mumbai under the name Mahindra & Mahindra in 1945. Ghulam Muhammad helped establish the accounts and financial revenue of the company and served as its founding accountant.
He later joined the Indian Railway Accounts Service, serving first in the Indian Railway Board before working as the Controller of General Supplies and Purchase. For his services to the British government, he was appointed a Companion of the Order of the Indian Empire (CIE) in the 1941 New Year Honours.
After World War II, Ghulam Muhammad represented the Nawab of Bhawalpur at the Round Table Conferences, when he developed ties with Pakistan Movement leader Liaquat Ali Khan. He also served as advisor to the Nizam of Hyderabad, but left to join the Ministry of Finance in 1946. In the 1946 Birthday Honours, the last honours list in which Indian civil servants were honoured, he received a knighthood. When Liaquat Ali Khan became first Finance Minister of India in 1946, Ghulam Muhammad assisted Khan in drafting and preparing India's first budget.
On 14 August 1947, Ghulam Muhammad opted for Pakistan, settling in his native city of Lahore. He was appointed the country's first Finance Minister a day later. Initially, he drafted a highly centralised agenda for a planned economy, submitting the draft of the First Five-Year Plans in 1948.
However, due to inadequate studies and staffing, the plans did not materialise and the programme collapsed soon after being launched. In 1949, Ghulam Muhammad invited leaders of the Muslim world to the International Islamic Economics Organization in Pakistan, where he emphasised the idea of a Muslim economic bloc. During the same time, he began suffering from ill health, and his condition worsened from 1949 onwards.
He was appointed Governor-General by Prime Minister Khwaja Nazimuddin in 1951. Malik Ghulam Muhammad represented Pakistan as Governor General at the Coronation of Queen Elizabeth II held in London in 1953. He was present in Westminster Abbey alongside the other major Dominion Governors-General from Australia, Canada, New Zealand, South Africa and Ceylon.
Following anti-Ahmadi riots in Lahore in 1953, he declared martial law in the city under Lieutenant General Azam Khan. After the army quelled the riots, Ghulam Muhammad sacked Nazimuddin's government, helping Muhammad Ali Bogra replace him as Prime Minister.
In 1954, the Assembly of Pakistan tried to change the constitution to establish checks and balances on the Governor-General's powers. In response, Ghulam Muhammad dismissed the Constituent Assembly, an action that was challenged in the Sindh High Court by Maulvi Tamizuddin, the Speaker of the Assembly. The court's Justice Sir Georges Constantine ruled the Governor-General's decision illegal, but the ruling was overturned by Supreme Court of Pakistan, led by Chief Justice Muhammad Munir, in a split decision.
Historians consider this action the beginning of viceroyalty politics in Pakistan, in which the military and civil bureaucracy and not elected officials, would gain increasing influence over the country's policymaking.
Affected by paralysis, Ghulam Muhammad's health deteriorated, and he took a leave of absence in 1955. The acting Governor General, Iskander Mirza, dismissed him, and Ghulam Muhammad died in Lahore the following year.
He was the maternal grandfather of Yousuf Salahuddin, and related by marriage to Allama Iqbal, Pakistan's national poet and philosopher.