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China and Pakistan are currently discussing funding for ML-1 Project

China and Pakistan are currently discussing funding for ML-1 Project

Pakistan has publicly requested that China provide loans in USD rather than Chinese RMB to construct the much-anticipated Mainline-1 (ML-1) rail line from Karachi to Peshawar or that a combination of both currencies be acceptable for moving forward.

 

Authorities have officially communicated five significant points to Beijing to agree on a finance deal for the multibillion-dollar, strategically crucial ML-1 project within the China Pakistan Economic Corridor (CPEC). On the other hand, Pakistan has officially responded to China’s request to finalize the funding deal for the ML-1 project. For the convenience of the Chinese side, the Chinese side wants to give a loan for ML-1 in RMB currency. However, Islamabad has declared that a loan in US dollars or a combination of US dollars and RMB currencies is preferred.

 

China has also offered Pakistan a package of attractive terms and conditions and commercial loans for the building of the ML-1 project. Still, the Pakistani side is only interested in granting lenient terms. The Pakistani side informed China that the Framework Agreement for ML-1 provides that, as a strategic project, Beijing will offer funding on more accessible terms. The project is about to finance on concessional terms by the Chinese side, following this stipulation. Therefore, in comparison to past CPEC Infrastructure projects, Pakistan will accept better funding terms.

 

There are disagreements over the Chinese part of the loan for the project’s construction, as Pakistan had initially requested a 90 percent Chinese share and a 10% Pakistani share. On the other hand, the Chinese side recommended that China’s share by 85 percent and Pakistan’s part be 15 percent for the ML-1 project’s construction. After tense talks, the Pakistani side accepted China’s offer of an 85 percent loan to cover the cost of the ML-1. The Chinese team also suggested a 15 to 20-year project duration; however, Pakistan contended that the construction of ML-1 might take ten years. The loan repayment time would take another 15 years; therefore, Islamabad proposed a 25-year loan duration with a 10-year grace period. China requested that must pay the principal and interest within six months. The Pakistani side agreed and accepted that the government would extend the guarantee to the Chinese loan amount.

 

The National Economic Council (ECNEC) approved ML-1 for $6.8 billion, with China and Pakistan contributing 90:10 percent of the cost. Package-I of ML-I, costing US$ 2.7 billion, included the Nawabshah-Rohri Section (183 km), Multan-Lahore Section (339 km), Lahore-Lalamusa Section (132 km), Kaluwal-Pandora Section (52 km), and up-gradation of Walton Railway Academy in Lahore.

 

The cost of upgrading the Kiamari-Hyderabad Section (182 km) and the Hyderabad-Multan Section (566 km) under Package-II approved at $2.67 billion, excluding work done on the Nawabshah-Rohri Section in Package-I. In addition, the ECNEC approved a $1.42 billion budget to build the Lalamusa-Rawalpindi Section (105 km), Rawalpindi-Peshawar Section (174 km), and the establishment of a dry port near Havelian under Package-III.

Read more: China and Pakistan want the CPEC to be built to a high standard

 

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