ISLAMABAD: As Pakistan continues discussions with the International Monetary Fund (IMF) for a fresh bailout package, the government is deliberating on strategies to manage sovereign guarantees amounting to $6.7 billion for the Mainline-1 (ML-1) project under the China–Pakistan Economic Corridor (CPEC).
The Joint Cooperation Committee (JCC) under CPEC is set to convene virtually on May 24, following a meeting between delegates from both sides on May 23. The formal approval for certain projects, including the ML-1 project, is expected to be considered during these discussions.
Prime Minister Shehbaz Sharif’s upcoming visit to China aims to address concerns over the pace of CPEC and demonstrate Islamabad’s commitment to initiating the second phase of the project. Efforts will also focus on securing financing for ML-1 and outlining a plan to clear outstanding amounts owed to Chinese Independent Power Producers (IPPs).
Ensuring that sovereign guarantees remain within the agreed limit set by the IMF under the Extended Fund Facility (EFF) loan conditions is crucial for Islamabad. The Ministry of Finance is exploring options, including the possibility of treating the project as a central loan, to provide the necessary guarantee.
The financing committee, comprising representatives from Pakistan and China, will negotiate the terms of the loan. The Chinese side has expressed commitment to provide financing support, including loans with favorable terms, for this strategic project.
ML-1’s upgrade aims to enhance rail transportation by increasing operational speed and capacity. The project is expected to significantly boost passenger and freight handling capacities, addressing future population growth and economic demands.
However, there are observations from relevant ministries regarding governance reform and financial viability. The Ministry of Railways emphasizes the need for governance improvements and argues for the establishment of a new independent entity, the ML-1 Authority, to oversee the project.
Consultants will be hired to assist in implementing the governance structure, with the ML-1 project topping the agenda for the upcoming JCC meeting later this month.
