The Economic Coordination Committee (ECC), chaired virtually by Finance Minister Muhammad Aurangzeb, has approved Rs34.6 billion in sovereign guarantees for the 69-kilometre Sialkot-Kharian Motorway.
The decision aims to help the concessionaire achieve financial close under the project’s revised financing structure.
Rs34.6 Billion in Sovereign Guarantees Approved
The ECC approved Rs27.62 billion in new sovereign guarantees and rolled over Rs6.944 billion in operational viability gap funding.
The package includes:
- Rs17.4 billion for capital viability gap funding.
- Rs10.3 billion for commercial debt.
- Nearly Rs7 billion for operational viability gap funding.
As a result, the project can move closer to construction under the updated financial plan.
Project Cost and Financing Plan
The total financing requirement for the motorway stands at Rs89.7 billion.
The federal government will provide Rs45.7 billion, while Rs44 billion will be arranged by the project company.
The government awarded the project to M/s Sialkot Kharian Infrastructure Management (Private) Limited, a subsidiary of Frontier Works Organisation, in September 2021 under a public-private partnership (PPP) model.
Agreement Revised to Address Rising Costs
The government revised the PPP agreement in February 2026 after construction costs, inflation, financing expenses, and project requirements increased.
Consequently, the concession period was extended from 25 years to 29 years.
The revised agreement also requires the company to achieve financial close within six months.
Toll Rates and Revenue Sharing
The concessionaire will charge the following minimum tolls during the first year of operations:
- Cars: Rs4.1 per kilometre
- Mini-buses: Nearly Rs10 per kilometre
- Large buses: Rs13.7 per kilometre
- Heavy trucks: Rs23 per kilometre
Daily traffic is projected at around 23,700 vehicles.
Furthermore, the National Highways Authority will receive 7% of gross revenue from the 11th year of operations or after debt repayment ends.
If the project earns excess revenue, the NHA will receive 75% of the annual windfall gains.
Government Guarantees and Future Outlook
The federal government has also guaranteed that it will absorb interest costs exceeding 12% during commercial debt repayment.
Meanwhile, it will recover funds if interest rates fall below 10%.
According to the finance ministry, Pakistan plans to issue Rs683 billion in new sovereign guarantees between April 2026 and June 2027.
The current stock of sovereign guarantees stands at Rs4.4 trillion and is expected to exceed Rs5 trillion by June next year.
More than Rs2.4 trillion of these guarantees support the power sector, while Rs895 billion backs commodity operations.
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