Pakistan again requests China to finalize $1bn loan for Karachi-Hyderabad rail project

Pakistan has renewed its request for China to hold a critical financing committee meeting to negotiate a nearly $1 billion loan for the Karachi-Hyderabad segment of the long-delayed Mainline-I (ML-I) railway project, a key component of the China-Pakistan Economic Corridor (CPEC).

The Express Tribune reported that the Pakistani embassy in Beijing issued the request last week, marking the second appeal in the past year for a fifth joint financing committee session on the ML-I. 

Officials from Pakistan’s Ministry of Railways briefed the National Assembly Standing Committee on Planning about the situation, explaining that discussions with China are ongoing amid persistent financial and security challenges that have hindered project implementation.

The ML-I project declared CPEC’s sole "strategic" initiative, has faced setbacks for nearly seven years due to Pakistan's strained finances and Beijing's security concerns. 

China has suggested Pakistan first develop the Karachi-Hyderabad section, estimated at $1.1 billion, as a pilot before undertaking the broader $10 billion plan. 

Pakistan has requested a $950 million Chinese loan for this section but has yet to secure an agreement on loan terms despite four prior meetings. The country initially proposed a 25-year loan with a 10-year grace period at a 1% interest rate, financing 90% of the project cost. 

China countered with a shorter repayment term of 15-20 years, a financing ratio of 85%, and lending in Chinese renminbi. The current expected interest rate stands at 2.3%, but final terms are pending.

The pilot project plan, revised last year, lowered ML-I’s total cost from $10 billion to $6.67 billion by reducing its scope. Officials aim to finalize the financing agreement and then open bidding, but differences remain over sequencing. 

Security concerns remain a major roadblock for China. Following recent security incidents involving Chinese nationals, Prime Minister Shehbaz Sharif visited the Chinese embassy to ensure strengthened security measures.