The Asian Development Bank has issued a stark warning that its $360 million loan for Pakistan’s key highway project could expire unutilised by 2027 amid ongoing delays in implementation. The Asian Development Bank (ADB) has alerted Pakistan’s Economic Affairs Division that a USD 360 million loan for the ADB loan Pakistan highway initiative under CAREC Tranche III is at risk of lapsing. The funding, aimed at N55 highway widening, remains stalled due to NHA bidding controversy, with only minimal disbursements recorded since approval in 2023. Officials urge swift action to avert cancellation and cost escalations.
CAREC Tranche III Project Overview
The CAREC Tranche III forms part of the broader Central Asia Regional Economic Cooperation Corridor Development Investment Program. This multitranche financing facility, approved by the ADB in 2017, totals $800 million across tranches to enhance regional connectivity in Pakistan. Tranche III, specifically, targets the dualisation of approximately 330 kilometres of the N55 highway from Rajanpur to Dera Ismail Khan via Dera Ghazi Khan.
The project scope includes converting the existing two-lane road to four lanes across four lots: Rajanpur to Jampur (57.5 km), Jampur to Dera Ghazi Khan (64 km), Dera Ghazi Khan to Tibi Qaisrani (111.7 km), and Tibi Qaisrani to Dera Ismail Khan (96.2 km). Total project cost stands at $471.9 million, with the ADB providing $360 million and the Government of Pakistan contributing $111.9 million. Equivalent in local currency, this translates to about PKR 108 billion for the ADB portion at current rates.
Bids for construction were invited on 9 August 2024 and closed on 26 September 2024. The lowest bid received was Rs147 billion, below the estimated Rs170 billion including land acquisition, consultancy, and taxes. However, progress has been slow. As of 15 December 2025, cumulative contract awards reached just $4.14 million, representing 1% of the ADB loan, while disbursements were $1 million, or 0%.
NHA Bidding Controversy Delays Implementation
The primary hurdle stems from the NHA bidding controversy. Controversies arose after bids opened in February 2025, leading to scrutiny by the Public Procurement Regulatory Authority (PPRA) and five parliamentary standing committee meetings. Allegations of irregularities targeted the winning joint venture of NXCC, Dynamic Constructor, and Rustam Associates. The NHA defended the selection, noting the lead partner had no final blacklisting despite prior non-performance claims.
The Islamabad High Court intervened recently, ordering the award of work without further delay. The court rejected PPRA’s petition on the Rs172 billion contract, deeming it infructuous and warning that stalls could lead to loan cancellation, escalated costs, and reputational damage to Pakistan’s exchequer. The ADB loan Pakistan highway project has been stalled for eight months as of January 2026.
In a letter to the Economic Affairs Division, the ADB stated: “We seek EAD’s support in assisting NHA to expedite implementation, complete pending procurements, and ensure full utilisation of the loan proceeds within the MFF period.” The bank described the 2027 deadline as “firm, with no possibility of extension.”
Senate panels have also flagged issues. On 2 January 2026, a Senate committee was informed that delays in CAREC Tranche III could risk the entire loan. Earlier, in June 2025, the Senate Standing Committee on Communications recommended the Economic Affairs Division contact the ADB over NHA lapses in the bidding process.
Background on N55 Highway Widening
The N55 highway, also known as the Indus Highway, runs along the western bank of the Indus River, connecting Peshawar in the north to Karachi in the south. It forms a critical segment of CAREC Corridor 5, linking southern ports with economic centres in northern Pakistan, Afghanistan, and Central Asia. The route has been underutilised due to poor condition and vulnerability to floods, as seen in 2010, 2014, and 2022.
The overall MFF aims to rehabilitate and upgrade road networks for better trade and connectivity. Tranche 1 ($180 million, approved 2017) covered sections like Petaro-Sehwan and Ratodero-Shikarpur. Tranche 2 ($235 million, approved 2021) focused on Shikarpur-Kandhkot. Tranche III, approved on 7 December 2023 and effective from 13 March 2024, builds on these to complete the corridor.
Processing for Tranche III faced delays, shifting from 2022 to 2023 due to Pakistan’s 2022 floods and economic challenges. The project incorporates climate-resilient features, such as elevated alignments and improved drainage, to mitigate flood risks. Land acquisition and resettlement plans have been prepared, with drafts dated October 2023 and updates in August and September 2025 for various sections.
The N55 highway widening under CAREC Tranche III is vital for South Asia’s economic integration. It supports trade flows, reduces transport costs, and boosts access to markets for landlocked Central Asian countries via Pakistan. Delays not only threaten the ADB loan Pakistan highway funding but also hinder regional growth amid Pakistan’s fiscal constraints.
Impact on Pakistan’s Infrastructure and Economy
Pakistan’s infrastructure sector relies heavily on multilateral financing like the ADB loan Pakistan highway package. The country has secured multiple ADB loans recently, including $330 million for power transmission in November 2025 and $540 million for state-owned enterprise reforms and coastal resilience in December 2025. However, low utilisation rates plague projects, with the CAREC Tranche III showing minimal progress two years post-approval.
The NHA bidding controversy highlights systemic issues in procurement. Past tranches experienced delays in land acquisition and resettlement plans due to unavailable records and outdated cost estimates. For Tranche III, bid documents were prepared with intent to publish by December 2023, but actual tenders came in August 2024.
Economically, lapsing the $360 million could escalate costs by Rs billions due to inflation and currency fluctuations. It risks damaging Pakistan’s credibility with donors, complicating future borrowings amid a debt burden exceeding $130 billion. The project, if completed, could generate jobs, improve logistics, and enhance trade volumes along CAREC corridors.
What’s Next for ADB Loan Pakistan Highway
Authorities must resolve the NHA bidding controversy swiftly to award contracts and commence works. The ADB emphasises starting implementation early to utilise funds within the three-year period, targeting completion by 2026. The loan closing date is 30 June 2027.
The National Highway Authority plans to engage the supervision consultant already under contract from Tranche 2. Progress on land acquisition remains key, with independent valuation studies ongoing in Punjab. If delays persist, the ADB loan Pakistan highway risks full lapse, prompting potential reallocation or cancellation.
Failure to act could lead to serious repercussions for Pakistan’s infrastructure ambitions.
Published in SouthAsianDesk, January 12th, 2026
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