China, one of Pakistan’s few friends, which often helps Pakistan over the financial crisis, has suddenly changed its stand. China has demanded an additional guarantee from Pakistan to lend $ 600 million. Pakistan is taking this loan for a railway project. It is being said that China has taken this step in view of the deteriorating financial situation of Pakistan.
According to a report by the Express Tribune, the issue of additional guarantee was raised in the third joint ML-1 (Main Line-1) Financial Committee meeting for the rail project held on 13 December. Let us tell that China has also proposed a mixture of commercial and concessional loans in giving money to Pakistan for this railway project, which is contrary to Pakistan’s desire to get ‘cheap loans’.
A senior Pakistani official involved in the meeting said that China had raised the issue of additional guarantees during the meeting but did not make it part of the draft details shared with Pakistan. Both countries have not yet signed this draft document. The project involves doubling and repair of the 1872 km long railway track between Peshawar to Karachi.
This Pakistan project is significant for the second phase of the China-Pakistan Economic Corridor (CPEC). Pakistan has applied for debt relief from the G20 countries, due to which, for clarity, China raised the issue of additional guarantees. Sources said that in the third phase of negotiations on financial issues, further situation was clarified regarding the loan of six billion dollars for the project.
Under debt relief from G-20 countries, Pakistan cannot take commercial loans at higher rates, except with prior approval as per the draft International Monetary Fund and World Bank. In August this year, the Executive Committee of the National Economic Council (ECNEC) approved the strategically important Main Line-1 project to be built at a cost of $ 6.8 billion. The ECNEC meeting lasted for only 20 minutes and financial and technical issues were not resolved.
Sources have said that Pakistan wants to get $ 6 billion at one percent interest rate while China has offered loans under both commercial and concessional categories.