Sialkot-Kharian Motorway Receives Major Financial Backing from ECC

Sovereign guarantees aim to help the motorway project achieve financial close and advance infrastructure development

Sialkot-Kharian Motorway Receives Major Financial Backing from ECC


The Economic Coordination Committee (ECC), chaired virtually by Finance Minister Muhammad Aurangzeb, has approved sovereign guarantees worth Rs34.6 billion to support the development of the 69-kilometre Sialkot-Kharian Motorway, reinforcing the government's commitment to improving Pakistan's transport infrastructure.

The approved package includes Rs17.4 billion for capital viability gap funding, Rs10.3 billion for commercial debt, and nearly Rs7 billion for operational viability gap funding. The ECC also endorsed the issuance of new sovereign guarantees amounting to Rs27.62 billion, along with the rollover of previously issued operational funding guarantees worth Rs6.944 billion. These measures are intended to help the concessionaire achieve financial close under the project's revised financing framework.

The motorway requires total financing of approximately Rs89.7 billion, with the federal government contributing Rs45.7 billion, while the remaining Rs44 billion will be arranged by the Frontier Works Organisation (FWO) subsidiary responsible for the project.

The motorway was awarded in September 2021 to M/s Sialkot Kharian Infrastructure Management Private Limited, an FWO subsidiary, under a public-private partnership (PPP) model. Earlier this year, the government revised the concession agreement in response to higher construction costs, inflation, increased financing expenses, and adjustments to the project's scope. Under the updated agreement, the concession period has been extended from 25 years to 29 years, with the company required to achieve financial close within six months.

Once operational, the motorway will introduce a minimum toll structure beginning at Rs4.1 per kilometre for cars, with higher rates applicable to buses and heavy vehicles. Daily traffic is projected at around 23,700 vehicles, supporting regional connectivity and commercial movement.

The financing arrangement also includes safeguards that allow the government to absorb interest costs above 12% during commercial debt repayment, while recovering funds if financing costs decline below 10%. Additionally, the concessionaire will share 7% of gross revenues with the National Highways Authority (NHA) from the 11th year of operations or after debt servicing concludes. In the event of higher-than-expected revenues, 75% of annual excess gross income will be transferred to the NHA.

According to the finance ministry, sovereign guarantees worth approximately Rs683 billion are expected to be issued between April 2026 and June 2027 for infrastructure projects and public sector entities. The country's outstanding sovereign guarantees currently stand at Rs4.4 trillion and are projected to exceed Rs5 trillion by the middle of next year, with the power sector accounting for the largest share.