LAHORE, Pakistan—Islamabad has slashed the size of the biggest Chinese “Silk Road” project in Pakistan by $2 billion, Railways Minister Sheikh Rasheed said, citing government concerns about the country’s debt levels.
The change is part of Islamabad’s efforts to rethink the One Belt, One Road initiative (OBOR, also known as Belt and Road) projects in Pakistan, where Beijing has pledged about $60 billion in financing but the new government of populist Prime Minister Imran Khan appears to be more cautious about the investment.
“Pakistan is a poor country that cannot afford the huge burden of the loans,” Rasheed told a news conference on Oct. 1 in Lahore.
“Therefore, we have reduced the loan from China under CPEC for rail projects from $8.2 billion to $6.2 billion,” he added, referring to the China-Pakistan Economic Corridor (CPEC).
The mega-project to revamp the colonial-era line that stretches 1,163 miles from Karachi to the northwestern city of Peshawar was initially priced at $8.2 billion, but wrangling over costs has led to delays. Rasheed said the government remains committed to the Karachi-Peshawar Main Line-1 (ML-1) project, but added that he wishes to further reduce the cost to $4.2 billion from $6.2 billion.
Islamabad has balked at the financing terms and has pushed for deeply concessional loans for ML-1. It also invited third countries to join or for the Chinese to be investors in the project, through a build-operate-transfer model that would rely less on debt.
The United States has criticized OBOR projects, warning that the loans could turn into debt traps for poor countries unable to pay them money back.
“CPEC is like the backbone for Pakistan, but our eyes and ears are open,” Rasheed said.
The ML-1 is the spine of the country’s dilapidated rail network, as well as the biggest source of revenue. Pakistan’s rail system has struggled to break even for decades as passenger numbers plunge, train lines close and the vital freight business nosedives.
Since 2013, China has launched OBOR construction projects across more than 60 countries, seeking a network of land and sea links with Southeast Asia, Central Asia, the Middle East, Europe, and Africa.
By Mubasher Bukhari