Pak Cuts Chinese 'Silk Road' Rail Project By $2 Billion Over Debt Worries

The megaproject to revamp the line stretching from Karachi to Peshawar was initially priced at $8.2 billion, but wrangling over costs has led to delay

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Pak Cuts Chinese 'Silk Road' Rail Project By $2 Billion Over Debt Worries

The ML-1 is the spine of Pakistan's dilapidated rail network.


Lahore: 

Highlights

  1. Pakistan is poor country, cannot afford huge loan burden: Sheikh Rashid
  2. Loan reduced for rail projects from $8.2 billion to $6.2 billion
  3. Islamabad has invited third countries to be investors in the project

Islamabad has cut the size of the biggest Chinese "Silk Road" project in Pakistan by $2 billion, railways minister Sheikh Rasheed said today, citing government concerns about the country's debt levels.

The megaproject to revamp the colonial-era line stretching 1,872 km from Karachi to the northwestern city of Peshawar was initially priced at $8.2 billion, but wrangling over costs has led to delays.

The changes are part of Islamabad's efforts to rethink key Belt and Road Initiative (BRI) projects in Pakistan, where Beijing has pledged about $60 billion in financing but the new government of populist Prime Minister Imran Khan appears to be more cautious about the Chinese investment.

"Pakistan is a poor country that cannot afford huge burden of the loans," Mr Rasheed told a news conference in Lahore.

"Therefore, we have reduced the loan from China under CPEC for rail projects from $8.2 billion to $6.2 billion," he added, referring to the China-Pakistan Economic Corridor (CPEC).

Mr Rasheed said the government remains committed to the Karachi-Peshawar Main Line-1 (ML-1) project but added that he wishes to further reduce the cost to $4.2 billion from $6.2 billion.

Islamabad has balked at the financing terms and has pushed for deeply concessional loans for ML-1. It also invited third countries to join or for the Chinese to be investors in the project through the build-operate-transfer (BOT) model that would rely less on debt.

The United States has criticised BRI projects, warning that the loans could turn into debt traps for poor countries unable to pay them money back. Beijing denies the claims, saying the loans are a win-win situation for both countries.

"CPEC is like the back bone for Pakistan, but our eyes and ears are open," Mr Rasheed said.

The ML-1 is the spine of the country's dilapidated rail network, as well as the biggest source of revenue. Pakistan's rail system has struggled to break even for decades as passenger numbers plunge, train lines close and the vital freight business nosedives.

 

© Thomson Reuters 2018


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