National Highway Authority incurs shocking losses

The National Highway Authority (NHA) has incurred a loss of 318 billion rupees for fiscal year (FY) 2024-25, causing the entity’s net deficit to grow. Data from credible reports reveals that NHA’s aggregate losses have surged past 1.82 trillion rupees.

The authority’s annual revenues in comparison sit at a measly 54.15 billion rupees. The magnitude of the deficit is such that the entity would need to redirect the entirety of its revenue stream, for approximately 34 years, towards the deficit for it to neutralize.

According to reports, the NHA has racked up loans amounting to 3.1 trillion rupees causing financial strain. However, the NHA authority possess assets valued at a whopping 5.8 trillion rupees - indicating that total assets stand higher than total liabilities.

Analysts have outlined that the NHA’s total asset position has been deteriorating over the last two years however as the entity held assets worth 5.9 trillion rupees and 5.84 rupees in 2022 and 2023 respectively.

 
According to a statement from Communications Minister Abdul Aleem Khan to the National Assembly, NHA’s budget deficit has fallen to 318 billion rupees from its previous high of 413 billion rupees. This translates into a drop of 23 percent indicating an improvement in the entity’s deficit.

However, the deficit value is twice that of the one recorded in 2022 causing many to highlight how this drop can be attributed to the ‘base effect’. The base effect refers to the phenomena of a drop being reported because the initial value was extremely low.

In the written statement, Abdul Aleem Khan outlined Islamabad’s provision of annual ‘development funds’ under the Public Sector Development Program (PSDP) at a ‘markup rate’. If the NHA can utilize these funds to establish projects that can boost revenues, the deficit might get narrower over time.

However, the aforementioned funds are one of the reasons for the large deficit that the NHA faces. According to reports, finance costs on PSDP loans are responsible for the deficit among the slew of other factors.

These factors include asset depreciation, interest payments and exchange losses on foreign loans. Moreover, Abdul Aleem Khan pointed out how the net deficit ‘reflects the impact of non-cash expenditures’ suggesting that the entity is not facing these outflows in real terms – instead, the outflows can be considered to be ‘accounting adjustments’.

A unit from the Ministry of Finance (MoF) has taken note of the NHA’s rising debt burden and is going over issues pertaining to the entity’s documentation of finances. If left unchecked, the NHA could continue to run massive deficits, leaving the national exchequer to bear the burden.