ISLAMABAD – Azerbaijan has extended an offer to provide over $1 billion in the form of a cash deposit to Pakistan, responding to the country’s request for funding the Sukkur-Hyderabad Motorway (M-6).
The offer follows Prime Minister Shehbaz Sharif’s recent visit, during which he sought $1.8 billion in funding for two major infrastructure projects.
The funding request includes $1.2 billion for the Sukkur-Hyderabad Motorway and $600 million for the new Hyderabad-Karachi Motorway (M-9).
In response, Azerbaijan has proposed two possible financing options.
Two Proposed Funding Options
State Oil Fund Deposit: Azerbaijan’s State Oil Fund could place a term cash deposit with the State Bank of Pakistan (SBP), allowing the federal government to lend the funds to the National Highway Authority (NHA) for motorway construction.
Direct Funding via IDB: Azerbaijan, in partnership with the Islamic Development Bank (IDB), could directly finance the Sukkur-Hyderabad Motorway project.
Previously, Azerbaijan had expressed interest in investing $2 billion in Pakistan, but due to the lack of concrete proposals from Pakistani authorities, the investment did not materialize.
Project Costs and Feasibility Studies
The estimated cost for the Sukkur-Hyderabad Motorway is $1.2 billion. To facilitate planning, the government has engaged the U.S.-based consulting firm AT Kearney for a feasibility study. Similarly, the cost of the Hyderabad-Karachi Motorway is projected to be $600 million, excluding expenses related to land acquisition.
Pakistan’s Existing Foreign Reserves and Loan Challenges
Currently, four countries—China, Saudi Arabia, the United Arab Emirates, and Kuwait—have collectively deposited $12.7 billion in the SBP to bolster Pakistan’s foreign reserves. These loans accrue interest and are rolled over annually due to repayment difficulties.
Disagreements Over Loan Mechanism
Reports suggest differences of opinion among Pakistani government departments regarding Azerbaijan’s offer. The Ministry of Finance has raised concerns about accepting a $1 billion cash deposit for the motorway project. It argues that instead of using a deposit, the NHA should secure a direct loan from Azerbaijan for construction purposes.
Public-Private Partnership and Bidding Process
Under the feasibility plan, the Sukkur-Hyderabad Motorway will be divided into five sections. Last month, the Public-Private Partnership Authority (P3A) approved the Project Qualification Proposal. Once board approval is secured, bidding will commence for the Hyderabad-Tando Adam and Tando Adam-Nawabshah sections under a public-private partnership (PPP) model.
The IDB has already indicated interest in funding the project, with a final decision expected after its delegation visits Pakistan next month.
