Islamabad:
Pakistan on Wednesday requested the Asian Development Bank (ADB) to fully finance the nearly $ 7 billion Mainline-I (ML-I) Railway project in consortium with other multilateral lenders not to secure funding from China.
The country waited almost a decade on China’s 85% financing obligation for the project. The government has now returned to ADB, which was eager to finance in 2016, but retired due to Peking’s insistence on only funding.
The Manila-based lender together with the Asian Infrastructure Investment Bank (AIIB) has shown a willingness to provide approx. 60% financing for the Karachi-Rohri section, sources said.
They added that ADB may also consider funding other sections, but due to the size of the project, the lender can take a sectional approach.
Pakistan raised the issue of complete funding from ADB, AIIB and other multilateral agencies under Prime Minister Shehbaz Sharif and Finance Minister Muhammad Aurangzeb’s meeting with ADB president Masato Kanda.
The early end of the Karachi-Rohri section is critical of the transport of copper and gold from Reko DIQ mines, sources said. Reko Diq Mining Company plans to start production in 2028, requiring a railway network for smooth and timely transport.
ADB has asked for detailed design documents in the Karachi-Rohri section to assess actual financing needs. It could cooperate with AIIB to give 60% of the funding, about $ 1.2 billion, to this section, they added.
The Planning Commission is expected to receive revised project costs this week to determine the true costs.
For mineral transport, Pakistan needs rail links from Reco DIQ to Gwadar and Reko Diq to Karachi, which requires quality infrastructure at ML-I and ML-III. But the government has not found financing of ML-III, which will largely handle copper and gold transport and may not be commercially viable, the sources said.
ADB has promised a $ 10 million project readiness in November to validate the former Chinese feasibility study of ML-I, veterinarian The project’s detailed design and review the Rohri-Multan section. Based on its findings, ADB is expected to approve loan facilities with multiple transfers with AIIB and the European Investment Bank, sources added.
Government estimates set the Karachi-Rohri section at $ 2 billion and Rohri-Multan section to $ 1.6 billion, which brought only these two to $ 3.6 billion. However, it is expected that the total costs due to internationally competitive bids are still less than the expected costs under the bilateral framework.
The prime minister was eager to hold the groundbreaking ceremony for the ADB-funded ML-I in June next year, but the Ministry of Railway and ADB gave December as a timeframe, the sources said.
The ADB president linked funding to the results of the project’s emergency report.
China had previously asked Pakistan to reduce ML-I costs from nearly $ 10 billion to $ 6.7 billion to make it financially viable. It was the only declared “strategically important” project under the China-Pakistan Economic Corridor (CPEC) and Islamabad demanded a concession loan.
The project has been exposed to over seven years of delay due to Pakistan’s high debt. Pakistan had sought a loan equal to 85% of the costs from China, but Beijing refused concession terms.
Prime Minister Shehbaz Sharif and President Xi Jinping had agreed a few years ago to promote the ML-I project in phases.
The original ML-in-track was 1,872 kilometers long, but was later reduced to reduce costs.
Sources warned that even with ADB and other multilateral funding, it will be difficult to arrange rupee coverage from the Ministry of Finance due to the small size of the public sector development program. The ministry will give over RS600 billion in rupee coverage for only the Karachi-Rohri section for the next three years.
ADB’s president also met Finance Minister Aurangzeb, who requested an improved guarantee to issue Panda bonds. Originally scheduled for $ 250 million this year, the ministry is now considering raising $ 750 million to bridge financing holes.
Aurangzeb said he would travel to China with the Prime Minister to discuss fluent Panda bonds, which required higher ADB guarantee boundaries.
A Ministry of Finance said that Aurangzeb highlighted Pakistan’s priorities for deeper cooperation with ADB in energy transition, climate insurance, transport, human capital and resource mobilization.
He expressed the appreciation of ADB’s consistent partnership and repeated Pakistan’s willingness to build climate insurance and improve disaster preparedness following recent floods.
Aurangzeb also thanked Adb’s president for prioritizing Pakistan as the first country he visited after taking over the office and remembering previous meetings in Washington in April.
The Minister acknowledged the ADB’s significant support in recent years with reference to reforms in resource mobilization, women’s financial inclusion, disaster risk financing and transition to pure energy.
The ADB president appreciated Pakistan’s economic reforms and resilience and predicted progress in stabilizing the economy and promoting structural changes, the ministry said.
He continues to insure ADB support in climate adaptation, population challenges, infrastructure and resource mobilization.
Kanda also promised emergency preparedness to help Pakistan launch his first Panda Bond and other innovative financing tools.
