Expressing concern over Pakistan’s growing debt, China has shown reluctance to approve USD 6 billion loan for the Mainline-I (ML-I) railway track -- the single largest project under the China-Pakistan Economic Corridor -- according to the record of a meeting and senior Pakistani officials, Express Tribune reported.

The construction of ML-1 project in three phases had been approved by the Executive Committee of the National Economic Council (Ecnec) in its meeting held in August last year. The actual cost of the project was USD 9 billion initially, including the equity amount of the government of Pakistan. But later, it was reduced gradually to USD 6.8 billion.

“Beijing conveyed its concerns during a meeting held on March 30 to discuss financing modalities of the project,” the officials said.

Moreover, the officials said China also termed the total project cost of USD 6.8 billion at the lower side, which Islamabad is now willing to increase further by 15 percent or USD 1 billion, the report said.

The sources said that in the last meeting, Chinese authorities were wary of Pakistan’s ability to service its debt. The concerns have now also been reflected in the meeting records.

 “The Chinese side have sought clarification regarding the possibility of raising further debt by Pakistan during the currency of the IMF program. The Pakistani side clarified that the debt situation is being monitored and there is no restriction under the program to raise debt for viable projects,” Deputy Chairman Planning Commission Dr. Jehanzeb Khan told The Express Tribune while responding to a question.

Chinese authorities also showed their reservations over restrictions imposed by Group 20 nations and the International Monetary Fund which, in Beijing’s view, could undermine the ML-1 project, according to discussions that take took place in the last ML-I Financing Committee meeting held on March 30th.

China also highlighted the dilapidated financial condition of Pakistan Railways that do not allow it to take $6 billion new debt on its books.

The negotiations to secure the loan have been going on for the last over one year but so far no conclusion has been reached. The project is facing delays of over three years against the original schedule agreed between the two countries.

Pakistan has asked for a 25-year repayment period, including a 10-year grace period.

(SAM)