ISLAMABAD, March 17: National Highway Authority (NHA) is grappling with severe financial challenges, as its net deficit for the fiscal year 2024-25 has surged past Rs318 billion.
This has pushed the authority’s total losses and loans to alarming levels, with the combined figure for both now exceeding Rs1.82 trillion and Rs3.1 trillion, respectively. Meanwhile, its annual revenues are a modest Rs54.15 billion.
NHA’s total assets, valued at Rs5.8 trillion, have been on a downward trajectory for the past two years. In FY22, the value stood at Rs5.9 trillion, while it decreased further to Rs5.84 trillion in FY23.
Communications Minister Abdul Aleem Khan reported that NHA’s net deficit for FY24 was Rs318.03 billion, representing a 23% decrease from the previous year’s deficit of Rs413 billion.
However, this is still nearly double the deficit recorded in FY22.
The minister also emphasized that the federal government provides development funds to NHA annually via a cash development loan under the Public Sector Development Programme (PSDP), with a set markup rate.
According to Khan, the net deficit reflects the impact of non-cash expenditures such as finance costs on PSDP and foreign loans, exchange losses, and depreciation.
He argued that these are accounting adjustments, not actual cash outflows, and that the NHA is not incurring real financial losses.
Debt Issues and Government Liabilities
Meanwhile, the Ministry of Finance’s Central Monitoring Unit (CMU) highlighted the significant financial strain NHA is facing due to its growing debt burden and complex accounting challenges.
NHA’s current outstanding loans amount to approximately Rs3.1 trillion, with an annual debt increase of Rs300 billion.
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This results in an interest expense of Rs98 billion, which is expected to rise above Rs150 billion annually, presenting a considerable credit risk for the government of Pakistan, which guarantees these loans.
The Ministry of Finance also pointed out that the presence of sovereign guarantees for public-private partnership (PPP) contracts further exacerbates the financial strain, amplifying the government’s exposure to credit risk.
NHA’s reliance on government support for debt servicing, coupled with its limited ability to generate revenue, is straining the country’s fiscal stability. The risks could intensify if loan defaults or liquidity crises arise.
On the NHA’s balance sheet, its total assets amount to Rs5.889 trillion, while liabilities stand at Rs2.9 trillion, indicating a high leverage ratio.
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Despite this, the NHA’s total income is just Rs74.007 billion, against expenditures of Rs242.57 billion, highlighting a significant operational deficit and increasing dependency on government funding.
In addition, NHA is burdened with depreciation costs exceeding Rs5.2 trillion, primarily due to the revaluation of its extensive infrastructure assets.
Escalating Risks
The Ministry of Finance has identified three major risk areas contributing to the NHA’s financial troubles: credit risk, market risk, and operational risk.
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Credit Risk: NHA’s rising debt and interest obligations, projected to exceed Rs150 billion annually, are placing the government at considerable credit risk. With debt accreting by Rs300 billion annually, the authority’s reliance on government-backed loans and sovereign guarantees intensifies fiscal pressures.
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Market Risk: NHA’s infrastructure projects are exposed to market risks, including inflation and fluctuating construction material costs, such as cement, steel, and fuel. These price changes increase project expenses, particularly when inflationary adjustments are not factored into project budgets or revenue models.
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Operational Risk: The financial strain and operational deficits are compounded by the challenges of maintaining and developing a vast network of infrastructure, all of which adds to the government’s fiscal burden.
The Ministry of Finance’s report underscores the urgent need for addressing these financial challenges to ensure the NHA’s long-term sustainability and reduce the strain on government finances.
