Pakistan to ask China for $2.7bn loan for first stage of Karachi-Peshawar rail line

Pakistan is to ask China to lend it $2.7bn to finance the upgrading of the rail line between Peshawar and Karachi at either end of the China-Pakistan Economic Corridor (CPEC), according to reports in the Express Tribune newspaper. 

The money will be formally requested in a letter to be sent this week. It will be spent on upgrading and "dualising" the 1,872km track, one of the four main railway lines in Pakistan.

According to the newspaper, the Ministry of Finance decided not to request the full $6.1bn that China has earmarked for the project over fears that Pakistan’s finances, which have suffered during the pandemic, would be overburdened.

The ministry commented: "It is the responsibility of the Ministry of Finance to ensure continued and improved debt sustainability and the advice of the Ministry of Finance on bankability of the project has been given in this context."

A map of the Pakistan railway network with the Karachi-Peshawar in black (Adnanrail/CC BY-SA 3.0)

Government sources told the newspaper that Pakistan was hoping to agree a 1% interest rate for the loan, but that China had not yet formally agreed to this.

Work on the first stage of the Mainline 1 project is due to begin in January and will last until December 2024. It will cover the construction of 527km of track between Peshawar, Rawalpindi and Lahore on the northern end of the line. No contractors have been selected for the project.

Currently, it takes around 22 hours to travel between Karachi and Peshawar. The upgrade will increase the line’s average speed from 105km/h to 160km/h and fit it with a modern signalling and control system.

An $8bn framework agreement for the work was signed in May 2017, during a visit to China by Pakistan’s then-Prime Minister Nawaz Sharif.

Top image: Rahim Yar Khan station, one of 184 along the Karachi-Peshawar line (Safeer Ahmad/CC BY-SA 4.0) 

Further reading:

Story for GCR? Get in touch via email: [email protected]

Latest articles in News