China Eximbank provides $259 million preferential buyer's credit (PBC) for Phase 1 of Karakoram Highway (KKH) Realignment Project (Linked to Project ID#72395)

On December 23, 2011, China Eximbank and the Government of Pakistan signed a $259 million preferential buyer’s credit (PBC) agreement [CHINA EXIMBANK PBC NO. (2011) 35 TOTAL NO. (186) and PBC-2011-35-186] for Phase 1 of the Karakoram Highway (KKH) Realignment Project (captured via Project ID#39030). On the same day, China Eximbank signed an RMB 585 million government concessional loan agreement [CHINA EXIMBANK GCL NO. (2011) 47 TOTAL NO. (397) and GCL-2011-47-397] with the Government of Pakistan for Phase 1 of the Karakoram Highway (KKH) Realignment Project (captured via Project ID#72395). The PBC carries a 2% interest rate. The other borrowing terms of the PBC are unknown. The GCL carries a 2% interest rate. The other borrowing terms of the GCL are unknown. The proceeds of the PBC and the GCL were to be used by the borrower to finance a commercial contract between Pakistan's National Highway Authority (NHA) and China Road and Bridge Corporation (CRBC), which was signed on December 21, 2010. The project had a total length of 24 kilometers and involved the realignment of a portion of the highway that was submerged under water during the Attabad landslide in 2010. It involved the realignment of roads, construction of 5 tunnels with total length of 7.12 km, 78 culverts and 2 bridges (471.8 meters). CRBC was the contractor responsible for project implementation. Construction began on July 26, 2012 and the project was completed on September 14, 2015. There are some indications that the China Eximbank preferential buyer’s credit for Phase 1 of the Karakoram Highway (KKH) Realignment 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 preferential buyer’s credit agreement for Phase 1 of the Karakoram Highway (KKH) Realignment 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 preferential buyer’s credit for Phase 1 of the Karakoram Highway (KKH) Realignment 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 preferential buyer’s credit for Phase 1 of the Karakoram Highway (KKH) Realignment 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#96247. The debt service suspension (rescheduling) from July 2021-December 2021 is captured via Project ID#96253.

Additional details

1. The Chinese project title is KKH堰塞湖改线项目 or 喀喇昆仑公路（简称KKH). This project is also known as The Realignment of Karakoram Highway Project, the Karakoram Highway (KKH) Realignment Project, and the Additional Financing for Karakoram Highway Improvement Project. 2. The November 2020 debt suspension agreement [No. DSSI2021PHASE1-036] can be accessed in it entirety via https://www.dropbox.com/s/x3x3n8p7mchwwp7/9.%20Debt%20Suspension%20Agreement%20for%20PBC%20The%20Other%20PBC%20Projects.pdf?dl=0.

Number of official sources

15

Number of total sources

22