• Project awaits IMF nod
• $400m WB loan for flood relief in jeopardy
ISLAMABAD: The implementation of the Main Line-1 (ML-1) railway project, stretching from Karachi to Peshawar over 1,726 kilometres, remains subject to IMF approval and the finance ministry’s ability to provide sovereign guarantees for a $6.67 billion loan from China, even though the project’s budget has been cut by 32 per cent.
Meanwhile, time is running out for authorities in Islamabad and Quetta to secure a $400 million concessional loan from the World Bank amid a lack of progress on a major flood rehabilitation project in Balochistan, owing to hiccups arising out of bureaucratic issues and project preparation challenges.
This was the crux of a detailed background media briefing by a senior official, who also clarified that a hefty $4.2bn pledge by the Islamic Development Bank at the Geneva Conference for last year’s devastating floods included a $3bn oil financing “that was not part of the pledges for floods”, leaving financing from the Jeddah-based lender for flood rehabilitation and reconstruction at about $1bn.
Therefore, the total Geneva pledges for flood rehabilitation amounted to $7.4bn — significantly lower than the $8.7bn to $10.9bn reported by the then government through various announcements.
Talking about ML-1, the official said the framework agreement had been signed in May 2017. The project was estimated to cost $9.8bn, for which PC-1 was approved in August 2020 by the Executive Committee of the National Economic Council (Ecnec).
However, the project passed through ups and downs amid changing priorities and governments in Islamabad. Pakistan and China are expected to make a formal announcement and sign an addendum to the framework agreement during the upcoming visit of Caretaker Prime Minister Anwaarul Haq Kakar to Beijing to represent Pakistan at the Belt and Road Initiative (BRI) conference.
The project cost has now been revised to $6.67bn by the two sides, obviously at the cost of reduced scope and quality of the project.
Responding to a question, the official said that even the revised size of the Chinese loan remained an issue and would need the IMF’s consent depending on the position, to be clarified by the finance ministry, about the space for issuing sovereign guarantees for the loan.
Under the law dictated by the lenders, the government is bound not to issue federal government guarantees beyond 2pc of GDP in a year; the ML-1 loan, even after the cost adjustment, is roughly around this limit.
The official, however, explained that the Ministry of Railways would have to come up with a “viable and sustainable” business plan and revised PC-1 for Ecnec approval.
He hoped that the first phase of the project might begin next year if financial allocations were made in the 2024-25 budget and the process of international bidding was completed in time.
The major change to the project is the reduction in trains’ operational speed from 160 kilometres per hour to between 120 km/h and 140 km/h.
To cut costs, several bridges, underpasses and flyovers would be removed from the project design where existing structures could sustain traffic, while underpasses and flyovers would be restricted to cities and towns.
The revised project would also be implemented in three phases and packages, starting with Package 1 of $2.7bn to be completed in five years; Package 2 of $2.6bn in seven years; and Package 3 worth $1.4bn to be completed in four years.
World Bank loan
Talking about flood rehabilitation, the official said that about $4bn worth of projects out of $7.4bn pledges made by various lenders — chiefly the World Bank, Asian Development Bank, and the Islamic Development Bank — had been approved and under various stages of implementation. The remaining projects of about $3.4 were at the preparation and approval stages.
The official said a major part of the donor-funded flood projects were in Sindh, where the progress was satisfactory both in terms of implementation and disbursements by the lenders, but a major project for Balochistan involving $400m financing from the World Bank could not make any headway.
“Donors are pushing us,” he said, adding that the project cost might have already gone beyond Rs100bn from Rs88bn estimated last year.
Published in Dawn, October 14th, 2023
