Political turbulence, foreign debt limits and the Covid-19 pandemic have all come together to slow down Chinese investment in Pakistan as Beijing holds off on projects under the $62 billion China-Pakistan Economic Corridor (CPEC), including a $6.1 billion railway renovation plan.

Pakistan as Beijing holds off on projects under the $62 billion China-Pakistan Economic Corridor (CPEC), including a $6.1 billion railway renovation plan.

The recent controversy is surrounding the Main Line 1, or ML-1, railway project.

The largest in China’s Belt and Road Initiative (BRI).

China is hesitant to finance it at the 1 per cent interest rate requested by Islamabad. With 2,655km of track, it connects Karachi in the South to Peshawar in the North. It also includes dualisation and upgrading of the railway track from Peshawar to Karachi.

The ministry of railways was in favour of making the request for full financing of $6.1 billion but due to overall debt sustainability fears.

They decided to request for the loan across three phases, subject to China’s ratification.

Reports indicate that the Pakistan railways would find it difficult to continue paying salaries.

And pensions to its employees without a cash injection from the federal government. Federal minister for railways Sheikh Rashid Ahmed claimed that ML-1 will provide jobs to 150,000 people in Pakistan.

But this claim has contested by critics, experts and the opposition.

The financial breakdown is for Pakistan to invest 10 per cent of the project cost.

As equity and to bear the remaining 90 per cent through a Chinese loan under the CPEC framework. Only Chinese companies entitled to bid on the project, according to government sources.

The financial breakdown is for Pakistan to invest 10 per cent of the project.

Cost as equity and to bear the remaining 90 per cent through a Chinese loan under the CPEC framework. Only Chinese companies are entitled to bid on the project, according to government sources.

This project is not a “Chinese investment” but a project backed by “Chinese loans”. Economists monitoring CPEC progress opine that China wants to ensure.

That projects are viable enough to make financial sense even under tighter conditions. They have been reluctant to slash interest rates on new or existing projects both in Pakistan and globally.