China Eximbank provides $327.74 million preferential buyer’s credit for Karakoram Highway Improvement (Raikot-Khunjerab Section) Project (Linked to Project ID#39030 and #72395)

On January 18, 2008, China Eximbank and the Government of Pakistan signed a $327,740,000 preferential buyer’s credit (PBC) agreement [CHINA EXIMBANK PBC NO. (2008) 1 TOTAL NO. (41) and ID#320080001] for the Karakoram Highway Improvement (Raikot-Khunjerab Section) Project. The PBC carried the following borrowing terms: a 12 year maturity, a 3% interest rate, and unknown grace period. This project, which is also known as the Karakoram Highway (KKH) Upgrade Project, involved the upgrading of a 335 km segment of the Karakoram Highway runs from Raikot to Khunjerab. This segment was widened from 10 to 30 meters, making it suitable for heavy and long vehicles and allowing it to remain functional throughout the year. The project also involved the construction of 32 new bridges and rehabilitate 27 existing bridges. Its total cost was $491 million. China Road and Bridge Corporation (CRBC) and the Pakistan National Highway Authority (NHA) were responsible for implementation of the project. National Engineering Services Pakistan (Nespak) served as a consultant for the project. A groundbreaking ceremony was held on February 16, 2008. Construction began on August 1, 2008. The project was successfully completed on November 30, 2013. The road work was designed and constructed in accordance with China’s three-level highway standard. Final inspection of the project was was carried out by NHA's Inspection Wing. There are some indications that the China Eximbank buyer’s credit loan for the Karakoram Highway Improvement (Raikot-Khunjerab Section) Project financially underperformed vis-a-vis the original expectations of the lender. On or around July 1, 2020, China Eximbank and the Government of Pakistan signed a debt suspension agreement. Under the terms of the agreement, the lender agreed to suspend principal and interest payments due between July 1, 2020 and December 31, 2020 under the buyer’s credit loan agreement for the Karakoram Highway Improvement (Raikot-Khunjerab Section) Project. Then, on November 19, 2020, China Eximbank and the Government of Pakistan signed another debt suspension agreement [No. DSSI2021PHASE1-036]. Under the terms of the agreement, the lender agreed to suspend principal and interest payments due between January 1, 2021 and June 30, 2021 under the buyer’s credit loan agreement for the Karakoram Highway Improvement (Raikot-Khunjerab Section) Project. Then, on or around July 1, 2021, China Eximbank and the Government of Pakistan signed another debt suspension agreement. Under the terms of the agreement, the lender agreed to suspend principal and interest payments due between July 1, 2021 and December 31, 2021 under the buyer’s credit loan agreement for the Karakoram Highway Improvement (Raikot-Khunjerab Section) Project. The debt service suspension (rescheduling) from July 2020-December 2020 is captured via Project ID#96254. The debt service suspension (rescheduling) from January 2021-June 2021 is captured via Project ID#96251. The debt service suspension (rescheduling) from July 2021-December 2021 is captured via Project ID#96253.

Additional details

1. The Chinese project title is 喀喇昆仑公路改扩建项目 or 喀喇昆仑公路（简称KKH). 2. Some ancillary works were also undertaken by CRBC to realign the highway due to a landslide that happened in 2010. 3. For details on the China Eximbank-financed realignment work of the Karakarom Highway, see Project ID#39030 and #72395. 4. Note that the upgrading and realignment works on the road are jointly called the Phase-I project of KKH Highway. 5. The November 2020 debt suspension agreement [No. DSSI2021PHASE1-040] can be accessed in it entirety via https://www.dropbox.com/s/xzpw6c8dp9e2lrt/13.%20Debt%20Suspension%20Agreement%20for%20BC%20Other%20Projects.pdf?dl=0.

Number of official sources

15

Number of total sources

30