The National Highway Authority (NHA) reported a continuous decline in gross profit over the past three years as expenditures outpaced annual income.
In FY2022, the NHA’s gross profit stood at Rs45.77 billion but dropped by 52% to Rs21.84 billion in FY2023. The decline continued in FY2024, with profits plunging by another 34% to Rs14.28 billion.
Despite increased revenue from toll operations, right-of-way charges, rental income, and other sources, the NHA said that “accounting financial adjustments” had significantly affected its financial position.
The authority reported total income of Rs97 billion for FY2024, a 24% increase from Rs78.4 billion in FY2023, which had grown by just 6% compared to Rs74 billion in FY2022. However, expenditures surged by 46% to Rs83 billion in FY2024, up from Rs56.5 billion in FY2023 and more than doubling from Rs28 billion in FY2022.
“The pace of our expenditure growth is outpacing our revenue, which is why profits are declining,” the NHA stated.
The authority explained that it primarily finances its managerial and operational costs from its own resources “without exerting an extra burden on the federal government.” It attributed its net deficits to “non-cash expenditures, such as finance costs on PSDP and foreign-relented loans, exchange losses, and depreciation.”
The NHA insisted that it was “not experiencing real financial losses, as the deficits are primarily due to accounting adjustments rather than actual cash outflows.” It maintained that these adjustments “create a discrepancy between reported financial performance and actual cash flow,” meaning that its operations are not causing a drain on cash resources.
Despite this explanation, the Ministry of Finance has expressed concerns over the NHA’s financial sustainability. “The NHA holds outstanding loans totaling around Rs3.1 trillion, with an annual debt accretion rate of Rs300 billion,” the ministry said.
Interest payments on this debt stand at Rs98 billion, with projections estimating they could surpass Rs150 billion per year. “This creates a substantial credit risk for the government of Pakistan, which guarantees these loans,” the ministry warned.
The government also faces additional financial exposure due to sovereign guarantees for public-private partnership contracts. “The NHA’s dependence on government support for debt servicing, combined with its limited revenue generation capabilities, strains the government’s fiscal stability, particularly if loan defaults or liquidity crises arise,” the ministry noted.
It categorized the NHA’s financial troubles into three major risk areas: credit risk due to its growing debt burden, market risk from external economic conditions, and operational risk from inefficiencies in revenue collection and expenditure management.
With the authority’s financial health under scrutiny, policymakers may need to reassess its funding model and debt obligations to mitigate risks to the national economy.
