ISLAMABAD:
Cabinet members have expressed reservations regarding the acquisition of foreign currency debt from China for the implementation of Phase 1 of the Main Line-1 (ML-1) project.
Sources told that the Ministry of Railways had presented a proposal to the cabinet concerning the Financing Commitment Agreement between the National Railway Administration of China and the Ministry of Railways of Pakistan.
During a cabinet meeting, a member suggested that the Hyderabad-Karachi segment of the project should be financed using domestic resources.
Another member stressed the need for stringent monitoring of any increase in foreign currency debt.
The cabinet was briefed on the framework agreement signed in 2017 between the National Railway Administration of China and the Ministry of Railways of Pakistan for the ML-1 project.
The agreement had been reached in July 2023 to implement the project in phases, with Phase 1 covering the Karachi to Multan segment, including the Pakistan Railways Academy in Walton. Phase 2 would focus on the Multan to Peshawar segment.
The Ministry of Railways explained that in June 2024, during the prime minister’s visit to China, he highlighted the importance of commencing work on Phase 1 as soon as possible.
Following this, Chinese experts visited Pakistan in July-August 2024 and confirmed their readiness to start work on the Karachi-Hyderabad section of Phase-1, pending endorsement from the Pakistani side.
The prime minister, upon receiving a briefing on the Chinese experts’ visit, was informed of their proposal.
After thorough discussions, it was decided that the Minister for Planning, Development and Special Initiatives, along with the Secretary of Railways, would review the proposal and explore options for securing a financing commitment for the entire Phase-1.
The matter was subsequently placed before the cabinet for consideration.
A draft financing commitment agreement was prepared and shared with relevant ministries, including the Economic Affairs Division, Ministry of Foreign Affairs, Ministry of Planning, Development and Special Initiatives, and the Finance Division.
The Law Division also vetted the draft agreement.
The Ministry of Railways underscored that ML-1 is a strategic and financially viable project. The Financial Committee of China and Pakistan on Mainline 1, led by the Deputy Chairman of the Planning Commission, had designed the project under the agreed framework and analysed its returns and viability.
The cabinet was asked to approve the initiation of negotiations for the Financing Commitment Agreement.
As per the Rules of Business, 1973, it was recommended that approval be granted for negotiations at this stage, with the draft agreement to be submitted to the cabinet for final approval upon the conclusion of negotiations.
It was also suggested that representatives from the Ministries of Finance, Economic Affairs, and Law and Justice be involved in the negotiation process.
Ultimately, the cabinet approved the initiation of negotiations on the Financing Commitment Agreement with China’s National Railway Administration, directing the Ministry of Railways to include representatives from the Ministries of Finance, Economic Affairs, and Law and Justice in the negotiations.
The finalised draft agreement will be submitted for the cabinet’s approval once negotiations are completed.
