Pakistan to borrow in US$ and Yuan for ML-1 Rail Project

February 19, 2021

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Pakistan has decided in principle to borrow $ 6 billion from China for the ML-1 project in Chinese Yuan and US Dollar.

In the meantime, Pakistan is ready to abandon its original stance on loan interest rates. It should be noted that the ML-1 project is the largest part of the China-Pakistan Economic Corridor (CPEC), which will Update and modernize the Karachi-Peshawar railway track. Pakistan has asked China to lend the equivalent of US $ 6.6 billion but China iswilling to lend in its own currency, the Renminbi (RMB). However, both sides have now agreed on loans in Chinese and US currencies.

However, the proportion of debt in the dollar and the Yuan is still unknown. Negotiations on a loan for the ML-1 project have been going on for over a year, but there is no final result of the negotiations yet.

Speaking to the Express Tribune, Federal minister of planning and Chairman of the CPEC committee Asad Omar has confirmed that the Government had been briefed on ML-1 funding priorities and had been requested to discuss the matter with the Chinese. authorities.

Asad Omar said the ML-1 project is the government’s first priority at the upcoming CPEC meeting. But he said that the date of the meeting has not yet been determined.

In August 2020, ECNEC approved a strategically important ML-1 project with a total value of $ 8.68 billion. Pakistan has asked China to provide $ 2.44 billion in the first part of the project. Pakistan intended to borrow $ 6.6 billion from China at 1% per annum, which China did not accept. Sources said Pakistan has told China that it intend to accept better financing terms than previous CPEC projects.

The government also agreed to borrow 85% of the total cost of the Chinese project. However, the two countries were unable to agree on a maturity date. China wants to pay off the loan in 15-20 years, which can be extended for another five years. Pakistan wants the loan to mature 25 years with an additional grace period of 10 years. Habib Rahman Gilani, secretary of railways, told the Express Tribune that China is officially ready to fund the project.