Pakistani railway project with clouds of doubt to due to Chinese financing delays

A Pakistani laborer digs in preparation for the replacement of concrete sleepers along a railway track in Karachi in Jan. 2018. © Reuters

Pakistan's Main Line (ML-1) railway line project could be in jeopardy due to financing delays from China’s Exim Bank.

The maturity period for loans is a source of concern between Pakistan and China, with the latter wanting to reduce the loan’s term to 15-20 years and finance an 85% part of the project.

The Pakistani side however wants a 25-year term.

China also complains that Pakistan has inexperienced staff that are incapable of operating a modernised rail system based on cutting-edge technology.

Meanwhile, China has indicated that it is willing to fund the initiative with RMB (Chinese Currency) in order to internationalise the currency.

Junaid Akbar, Chairman of National Assembly Standing Committee on Planning, Development and Special Initiatives said if financial negotiations with China did not conclude successfully, Islamabad would turn to Russia or another country.

However, the likelihood of any other country to invest a large amount seems negligible, reported Islam Khabar.

Pakistan’s economy is already under stress and the delay in this project is going to be a setback to Islamabad’s claim of direct employment for 20,000 locals.

Islamabad has also been proposed to hand over the project to Chinese companies to run for a period of three to five years.

"The biggest question arising before the policymakers was that who will run the modernised railways after the completion of ML-1,” according to an official.

As ANI pointed out, Pakistan Railway is already dependent on government subsidies and the Railways is plagued with the problem of insufficient revenue.

The railways’ departmental deficit during the current Pakistan Tehreek-e-Insaf (PTI)-led government increased to PKR 46 billion in 2021 and total losses amounted to PKR 1.19 trillion, mainly due to low traffic, both passenger and goods.

Similarly, the number of freight carriages was reduced from 16,159 to 14,327.

On viability count, PR has suffered an estimated loss of PKR 1.2 trillion during the past 50 years.

Its losses in the FY 2017 were approximately PKR 40 billion.

Pakistani media reports indicate that 57 passenger trains had been shut down so far and now only 85 trains were available for various routes across the country.

READ MORE: Finance Minister Staikouras: Greece will repay final IMF loans by March, surplus by 2023.