Thu, Oct 04, 2018 - Page 9 News List

Fearing debt trap, Pakistan rethinks Chinese ‘Silk Road’

Worried about the possibility of having to hand over critical infrastructue to Beijing due to unpaid debt, Islamabad is leaning toward BOT projects, but China is not interested

By Drazen Jorgic  /  Reuters, ISLAMABAD

Illustration: Mountain People

After lengthy delays, an US$8.2 billion revamp of a colonial-era rail line snaking from the Arabian Sea to the foothills of the Hindu Kush has become a test of Pakistan’s ability to rethink signature Chinese “Silk Road” projects due to debt concerns.

The rail megaproject linking the coastal metropolis of Karachi to the northwestern city of Peshawar is China’s biggest Belt and Road Initiative (BRI) project in Pakistan, but Islamabad has balked at the cost and financing terms.

Resistance has stiffened under the new government of populist Pakistani Prime Minister Imran Khan, who has voiced alarm about rising debt levels and said the country must wean itself off foreign loans.

“We are seeing how to develop a model so the government of Pakistan wouldn’t have all the risk,” Pakistani Minister for Planning, Development and Reforms Khusro Bakhtyar told reporters.

The cooling of enthusiasm for China’s investments mirrors the unease of incoming governments in Sri Lanka, Malaysia and the Maldives, where new administrations have come to power wary of Chinese deals struck by their predecessors.

Pakistan’s new government had wanted to review all BRI contracts.

Officials have said there are concerns the deals were badly negotiated, too expensive or overly favored China.

However, to Islamabad’s frustration, Beijing is only willing to review projects that have not yet begun, three senior government officials have told reporters.

The Chinese Ministry of Foreign Affairs said in a statement in response to questions faxed by Reuters that both sides were committed to pressing forward with BRI projects “to ensure those projects that are already built operate as normal and those which are being built proceed smoothly.”

Pakistani officials said they remain committed to Chinese investment, but want to push harder on price and affordability, while reorientating the China-Pakistan Economic Corridor (CPEC) — for which Beijing has pledged about US$60 billion in infrastructure funds — to focus on projects that deliver social development in line with Khan’s election platform.

Chinese Ambassador to Pakistan Yao Jing (姚敬) told reporters that Beijing was open to changes proposed by the new government and “we will definitely follow their agenda” to work out a roadmap for BRI projects based on “mutual consultation.”

“It constitutes a process of discussion with each other about this kind of model, about this kind of roadmap for the future,” Yao said.

Beijing would only proceed with projects that Pakistan wanted, he added.

“This is Pakistan’s economy, this is their society,” Yao said.

Islamabad’s efforts to recalibrate the CPEC are made trickier by its dependence on Chinese loans to prop up its vulnerable economy.

Growing fissures in relations with Pakistan’s historic ally the US have also weakened the country’s negotiating hand, as has a current account crisis likely to lead to a bailout by the IMF, which might demand spending cuts.

“We have reservations, but no other country is investing in Pakistan. What can we do?” one Pakistani minister told reporters.


The ML-1 rail line is the spine of Pakistan’s dilapidated rail network, which has in recent years been edging toward collapse as passenger numbers plunge, train lines close and the vital freight business nosedives.

Khan’s government has vowed to make the 1,872km line a priority CPEC project, saying it would help the poor travel across the vast South Asian nation.

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