China Eximbank provides $203.25 million buyer's credit loan for the Lahore Orange Line Metro Train Project (Linked to Project ID#37280, #57673, and #54420)

On April 27, 2011, the Government of Pakistan first announced its interest in pursuing a project to develop a city-wide train system in the eastern city of Lahore. Lahore, the capital of Punjab province, is Pakistan’s most populous and prosperous province with more than 5 million people. Pakistani officials expected the new transport system, the first of its kind in the country, to substantially decrease road traffic. Then, on December 21, 2015, China Eximbank and the Government of Pakistan signed three separate loan agreements for the Lahore Orange Line Metro Train Project. The first loan agreement is a $203.25 million buyer’s credit loan (BCL) agreement [ID#BC-OLL-2015 and ID#2015212493]. It carries a 5.2% interest rate, 2 year grace period, and 20 year maturity (captured via Project ID#53820). The second loan agreement is a $1,235,480,000 preferential buyer’s credit (PBC) agreement [CHINA EXIMBANK PBC NO. (2015) 34 TOTAL NO. (377) or ID#PBC-OLL15-34377]. It carries a 20 year maturity and a 2% interest rate (captured via Project ID#37280). The third loan agreement is an RMB 1,200,000,000 government concessional loan (GCL) loan agreement [ID#GCL-OLL15-20559 or CHINA EXIMBANK GCL NO. (2015) 20 TOTAL NO. (559)]. It carries a 2% interest rate and 20 year maturity (captured via Project ID#54420). The proceeds of the GCL, PBC, and BCL were used by the borrower to finance a commercial contract between Punjab Mass Transit Authority (PMA) and CR-NORINCO [a joint venture of China State Railway Group Co. Ltd. (CR) and China North Industries Corporation (NORINCO)], which was signed on April 20, 2015. According to the Government of Pakistan’s Economic Affairs Division, $672.7 million of the “mixed credit” (GCL, PBC, and BCL) from China Eximbank had been disbursed as of June 30, 2017. The Lahore Orange Line Metro Train Project involved the construction of a 27km two-lane metro bus corridor runs through the heart of Lahore along Multan Road, McLeod Road, and GT Road. Upon completion, the Orange Metro Line was expected to have capacity for 30,000 passenger per hour and serve 250,000 passengers per day. CR-NORINCO — a joint venture of China State Railway Group Co. Ltd. (CR) and China North Industries Corporation (NORINCO) — was the entity responsible for project implementation. The project was initially expected to begin by the end of 2014 and last for 27 months (estimated completed date: March 31, 2017). The project was ultimately completed on December 10, 2019. However, it encountered various problems and delays during implementation. The Lahore Development Authority began marking sites for demolition in August 2015, including government buildings, royal tombs, mosques, schools, and residences. Civil works were then initiated by CN-NORINCO on October 25, 2015. Popular protests prompted the Lahore high court to suspend work surrounding heritage sites in January 2016 while the court deliberated the issue. Then, in August 2016, the Lahore high court ruled that the government could not evict people or harm the heritage sites. The Punjab provincial government challenged the ruling, and in April 2017, the Supreme Court reversed its decision, allowing construction to continue under 31 conditions to limit the disruption and damage of the project. Then, in May 2019, a special audit of the project project was submitted to the federal government. The audit revealed losses to the national exchequer and alleged irregularities worth billions of rupees. More specifically, the audit disclosed that no framework agreement existed between the federal and provincial governments and that sub-contractors were granted several contracts without any approval. The audit claimed that a loss of $1,528,000 had been incurred to the national exchequer. It also claimed more than $1.4 million had been spent on the basis of favoritism with regard to project allowance. There are some indications that the China Eximbank buyer’s credit loan for the Lahore Orange Line Metro Train 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 Lahore Orange Line Metro Train 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 Lahore Orange Line Metro Train 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 Lahore Orange Line Metro Train 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 巴基斯坦拉合尔轨道交通“橙线”项目. 2. In January 2017, Industrial and Commercial Bank of China (ICBC) also provided a Rs 1.36 billion short-term loan in additional financing for the Orange Line Metro Project in Pakistan (captured in #57673). 3. 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

31

Number of total sources

58