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Pak cuts Chinese 'Silk Road' rail project by USD 2 bn over debt concerns

REUTERS
Published : Oct 1, 2018, 9:23 pm IST
Updated : Oct 1, 2018, 9:23 pm IST

'We have reduced loan from China under CPEC for rail projects from USD 8.2 bn to USD 6.2 bn', Pak minister said.

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

Lahore: Islamabad has cut the size of the biggest Chinese "Silk Road" project in Pakistan by USD 2 billion, railways minister Sheikh Rasheed said on Monday, 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 USD 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 USD 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," Rasheed told a news conference in Lahore.

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

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 USD 4.2 billion from USD 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," 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.

Tags: silk road project, cpec, china-pakistan ties
Location: Pakistan, Punjab, Lahore