Pakistan has agreed to borrow $ 6 billion in Chinese and US currencies for the largest China-Pakistan Economic Corridor (CPEC) project and also relaxed its stance on the cost of interest, as it seeks to quickly finalize an agreement to start construction of the railway. project.
Three weeks ago, the government shared a revised loan term sheet with Beijing to secure the loan for the Pakistan Railways Mainline-I (ML-I) project, changing its stance on interest rates and the currency of the loan, officials from the Ministry of Railways said.
Contrary to its earlier request to take out the $ 6 billion US dollar loan, Pakistan has indicated that it will accept a mixture of Chinese renminbi (RMB) and US dollar, officials said.
However, the share of each currency was not indicated in the revised term sheet.
China wants to grant the $ 6 billion RMB loan because it competes with the global dominance of the US dollar.
The government has planned to complete the ML-I project in several packages, spanning nearly 10 years and aiming to spread the loan over a longer period due to concerns expressed by the International Monetary Fund (IMF). However, loan negotiations have been going on for over a year, but so far no conclusions have been reached.
The Ministry of Railways has asked the Cabinet Committee on CPEC to make an “intervention” to demand a firm commitment from China to a loan of $ 2.4 billion for the package I of the project and the rapid finalization of the projects. loan conditions.
The Foreign Ministry has been briefed on ML-I funding priorities and has been invited to discuss the matter with Chinese authorities, Federal Planning Minister and CPEC Commission Chairman Asad Umar said in an interview. with The Express Tribune.
Umar said securing funding for the ML-1 project was the government’s top priority at the next meeting of the Joint Cooperation Committee (JCC) of CPEC – the highest bilateral decision-making body.
However, the minister said the date for the JCC meeting has yet to be decided. Pakistan has been trying to organize the 10th meeting of the CCM since October last year.
In August 2020, the executive committee of the National Economic Council (Ecnec) approved the strategically important ML-I project worth $ 6.8 billion.
Initially, Pakistan asked China to provide $ 2.44 billion for construction works under Package I. The project faces a delay of more than three years from the original schedule agreed between the two. country.
Pakistan has also changed its stance on interest rates, but it has yet to accept China’s position to get a mix of commercial and concessional loans, the sources said.
Expecting to be the only strategically important project declared under the framework agreement, Pakistan offered in April last year to secure the $ 6 billion loan at an interest rate of 1 %. But China did not accept the request.
Sources said Pakistan has informed China that it will agree to financing terms, which were favorable compared to previous CPEC projects, withdrawing its earlier request for 1% interest charges.
The government accepted the Chinese position of obtaining a loan equal to 85% of the total cost of the project.
The two parties did not converge on the loan repayment period. China has proposed a payback period of 15 to 20 years, including a five-year grace period.
Pakistan has requested a 25-year repayment period, including a 10-year grace period.
The Ministry of Railways informed the cabinet that the tender documents for Package I of the project were ready but could not be released in the absence of a “formal loan commitment. from China ”.
Railways Secretary Habibur Rehman Gilani told The Express Tribune that China officially agreed to fund the project at a meeting and this was also reflected in the meeting minutes.
“Some terms and conditions have been revised, which have been shared with the Chinese side and these will be discussed at the next fundraising committee meeting to be held soon,” Gilani said.
The ML-I project includes the dualisation and modernization of the 1,872 km railway line from Peshawar to Karachi and is a major milestone for the second phase of the CPEC.
Posted in The Express Tribune, February 19e, 2021.
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