ADB warns of $360 million loan lapse for CAREC project due to delay in road works

In a letter to the Economic Affairs Division (EAD), the Asian Development Bank (ADB) officials have raised concerns that a $360 million loan allocated under the Multi-tranche Financing Facility (MFF) for the Central Asia Regional Economic Cooperation Corridor (CAREC) Development Investment Programme’s Tranche III may expire without completion, due to significant delays in the project’s progress, Dawn reported. 

The delays are primarily caused by issues in the bidding process for the Tranche III road project, which involves widening sections of the N55 Highway. The project has been stalled for over eight months, following scrutiny in five parliamentary standing committee meetings. Without acceleration from the National Highway Authority (NHA), the funds may not be fully utilised before the December 31, 2027, deadline.

The loan is part of a larger project estimated at Rs170 billion, including land acquisition, consultancy, and taxes. The ADB is covering Rs108 billion, while the Pakistani government is funding the remainder.

Although the project faced delays, the Islamabad High Court recently ordered that the road project proceed without further holdups, warning that continued delays could lead to the cancellation of the loan, higher costs, and damage to Pakistan’s reputation. 

Despite these developments, ADB officials have expressed concerns over the difficulty in proceeding with the project without further approval and the risk of missing the bank’s firm deadline.

The NHA, under increasing pressure to meet the timeline, has argued against rebidding, stating that it would take more time and require additional approvals. The ADB has urged the EAD to help NHA expedite the process, complete pending procurements, and ensure full utilization of the loan within the MFF period.

The project’s approval has been contentious, with parliamentary committees and the Public Procurement Regulatory Authority (PPRA) raising concerns about the chosen bidder, a joint venture comprising NXCC, Dynamic Constructor, and Rustam Associates. Despite the issues raised, the NHA defended the selection, claiming the lead partner had not been blacklisted.

The ADB confirmed it had no objection to awarding the contracts to the lowest evaluated bidder, with the total project divided into four lots for various sections of the highway. However, the court’s ruling has emphasised the urgency of the situation, warning that any further delays could result in the refusal of the agreed financing facility.