Islamabad: The Pakistan Government has approved a financing agreement between Pakistan Railways and China for the Karachi-Peshawar Railway Upgradation Project (ML-1) under the China-Pakistan Economic Corridor (CPEC).
The government has reached a compromise to initiate work on the Karachi-Peshawar Railway Upgradation Project (ML-1) while addressing the International Monetary Fund’s (IMF) concerns regarding debt sustainability.
To align with the IMF’s guidelines, Pakistan will initially undertake construction work worth $2.4 billion for the first phase of the project. This phase, referred to as “package-1,” has been designed to fit within the IMF’s spending cap of $2.5 billion for the project during the current program period.
Despite the spending ceiling, construction progress will remain unaffected. Work on “package-2,” which is estimated to cost $2.7 billion, is scheduled to begin one year after “package-1.” Additionally, “package-3,” costing $1.7 billion, will commence two years after the start of “package-1.”
The Executive Committee of the National Economic Council (Ecnec) recently approved the ML-1 project along with three other projects, totaling Rs1.234 trillion. The ML-1 project has been approved at a revised cost of $6.806 billion, with funding shared between the governments of China and Pakistan.
Finance Adviser Dr Abdul Hafeez Shaikh, who chairs the Ecnec, has formed a committee to review a proposal to shift the $856 million Lalamusa-Rawalpindi section from “package-3” to “package-1,” as requested by Railways Minister Sheikh Rashid.
According to sources, China is expected to fund 85% of the ML-1 project, with Pakistan covering the remaining 15%. The project aims to upgrade the railway line from Karachi to Peshawar and is slated for completion within eight years. This decision clears the way to implement the project’s first phase. Additionally, the cabinet approved an amendment to the Rules of Business 1973, formally closing the Pakistan Public Works Department (Pak PWD) and marking it as inactive.
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