China Eximbank provides RMB 234 million government concessional loan for Pak-China Fiber Optic Cable Construction Project

Project narrative

On November 8, 2014, China Eximbank and the Government of Pakistan signed an RMB 234,000,000 government concessional loan agreement for the Pak-China Fiber Optic Cable Construction Project. The borrowing terms include a 2% interest rate but the grace period and maturity are unknown. The purpose of this loan is to cover 85% of the total project cost. The purpose of the Pak-China OFC Project is the lay an 820 km fiber optic cable line from the Khunjerab Pass on the China-Pakistan border to the city of Rawalpindi via Mansehra, Chilas, Danyore (Gligit), Karimabad and Sust. 466.54 kilometers of the route is located in Gilgit-Baltistan, while 287.66 kilometers of the route is located in Khyber Pakhtunkhwa province, 47.56 kilometers of the route is located in Punjab province, and 18.2 kilometers of the route is locted in in Islamabad Capital Territory. The line connects the Transit Europe-Asia Terrestrial Cable Network with that of Pakistan, which currently transmits its telecom and internet traffic through four undersea fiber optic cables, with another three undersea fiber optic cables under construction. The project also involved the installation of 172 km of aerial fiber optic cable from Karimabad to Khunjerab to supplement in landslide prone areas. It provides 26 high capacity microwave links as backup to OFC network and 9 node centers in different locations along Rawalpindi-Khunjerab belt. Huawei Technologies was the EPC contractor responsible for implementation. Special Communications Organization, China Telecom Global, and Pakistan Telecommunication Company also participated in implementation. The groundbreaking ceremony project took place on May 19, 2016. The project was originally scheduled to reach completion in November 2017. The project was ultimately completed on July 13, 2018. There are some indications that the China Eximbank loan for the Pak-China Fiber Optic Cable Construction 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 government concessional loan agreement for the Pak-China Fiber Optic Cable Construction Project. Then, on November 19, 2020, China Eximbank and the Government of Pakistan signed another debt suspension agreement [No. DSSI2021PHASE1-030]. 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 government concessional loan agreement for the Pak-China Fiber Optic Cable Construction 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 government concessional loan agreement for the Pak-China Fiber Optic Cable Construction Project. The debt service suspension (rescheduling) from July 2020-December 2020 is captured via Record ID#96254. The debt service suspension (rescheduling) from January 2021-June 2021 is captured via Record ID#96256. The debt service suspension (rescheduling) from July 2021-December 2021 is captured via Record ID#96253.