China Eximbank agrees in principle to provide government concessional loans to support ML-1 Railway Upgrading and Doubling Project

Project narrative

The Karachi-Peshawar Railway Line — also known as Rail Line 1 (RL-1) or Main Line-1 (ML-1) — is one of four main railway lines in Pakistan. The line begins in Karachi and ends in Peshawar connecting the north and the south of the country. Currently the line consists of 184 stations with a total length of 1,687 km with a total travel time of 22 hours. It runs from Karachi to Peshawar via Hyderabad, Nawabshah, Rohri, Rahimyar Khan, Bahawalpur, Khanewal, Sahiwal, Lahore, Gujranwala, and Rawalpindi. Parts of the ML-1 were established during the 19th century. Under the framework of the China-Pakistan Economic Corridor (CPEC), the line is expected to be upgraded in order to increase the average rail speed from current 105 km/h to 160 km/h. It is also expected that a computer based signaling and control system will be introduced and the entire track will be doubled. Another component of the project will involve the establishment of a Dry Port near Havelian and upgradingWalton Training Academy. On May 15, 2017, a framework agreement was signed by the Chinese Government and the Government of Pakistan on the financing of the first phase of upgrades to the ML-1. A Memorandum of Understanding (MoU) regarding the project was signed between Pakistan’s Ministry of Planning, Development and Reforms (MPDR) and China’s National Development and Reform Commission (NDRC). On the same day, a commercial contract for the project’s preliminary design was issued. A feasibility study was also conducted and the ML-1 project was approved by the Central Development Working Party (CDWP). On August 5, 2020, the Government of Pakistan’s Executive Committee of the National Economic Council (ECNEC) approved the project and announced that it would finance the upgrading and doubling of the ML-1 with three separate China Eximbank government concessional loans for thee different project components (or lots/packages) in order to avoid loan commitment fees. The RMB-denominated loans will reportedly carry matures of 20-25 years. Reports from October 2022 claim that the cost of the project will be 9.9 billion with 8.4 billion in loan from China and 1.5 billion from the Government of Pakistan, though a final agreement has not be reached. Then, in November 2022, during a meeting of Chinese President Xi Jinping and Prime Minister Shehbaz Sharif, both sides agreed to immediately activate their respective teams of technical and financial experts to fast-track progress on the much-delayed project. Both governments have also constituted a Financing Committee to finalize the concessional financing arrangement for the project.