China seeks additional guarantees before sanctioning USD 6 billion loan for rail project in Pakistan
Islamabad, Dec 23: China has sought additional guarantees before sanctioning a USD 6-billion loan for the Main Line-1 (ML-1) railway line project in Pakistan, due to the country's weakening financial position, according to a media report on Wednesday.
China has also proposed a mix of commercial and concessional loans to fund the rail project, going against Islamabad's wishes of 'cheapest lending'.
The issue of additional guarantees was raised during the third joint ML-1 Financing Committee Meeting held ten days ago (December 13), The Express Tribune newspaper reported, quoting official documents.
A senior Pakistani official involved in the negotiations said China raised the additional guarantees issue during the meeting but did not make it part of the draft of minutes shared with Pakistan.
The draft minutes have not yet been signed by both the countries.
The ML-1 project includes dualisation and upgrading of the 1,872-km railway track from Peshawar to Karachi and is a major milestone for the second phase of the China-Pakistan Economic Corridor (CPEC).
The official said China raised the additional guarantees issue to get clarity over Pakistan's financial condition after it applied for debt relief from the G-20 countries, which is only meant for the world's poorest nations.
The third round of financial negotiations gave further clarity on the Chinese position on USD6 billion lending for the USD6.8 billion strategically important ML-1 project of Pakistan Railways, sources in the Ministry of Economic Affairs said.
As part of debt relief from G-20 countries, Pakistan cannot secure expensive commercial loans, except those allowed under the International Monetary Fund and World Bank framework.
The Chinese authorities have proposed that "keeping in view the financial situation in Pakistan so also the conditions laid down by the G-20 regulations for debt suspension, the government of Pakistan may provide additional guarantee mechanism for the loan other than sovereign loan for the ML-1 project", according to officials privy to the negotiations.
It was surprising for us when China raised the issue of additional guarantees during the meeting, another senior Pakistani official who was part of the meeting said.
In August this year, the Executive Committee of National Economic Council (ECNEC) approved the strategically important ML-1 project worth USD 6.8 billion.
The ECNEC meeting had continued for hardly 20 minutes, leaving many critical issues about financing and technical details unresolved.
Both the sides have reached broad-based consensus on the technical parameters, including bidding documents, according to deliberations that took place in the joint bilateral third financial and seventh technical committee of ML-1 project.
But an early start of construction work on what the official described as strategically important project is unlikely after China linked the civil works with prior finalisation of financing mechanism of the single-largest project of the CPEC.
Unlike Pakistan's expectations of getting the USD 6 billion loan at 1 per cent interest rate, China has proposed a mix of commercial and concessional lending, the sources said.
China maintained that the lending will be both a combination of commercial and concessional loans, according to sources.
The Economic Affairs Ministry had proposed a 1 per cent rate while the Ministry of Railways was inclined to take the mix of commercial and concessional rate, subject to the condition that the average rate may remain lower than 2.38 per cent, sources said.
However, Pakistan was expecting that due to the strategic nature of the project, China would accept its request for 1 per cent interest rate and a grace period of 10 years for repayment of the loan.
China has offered to finance 85 per cent of the project cost with payback period of 15 years to 20 years in biannual tranches. Sources said the Chinese had offered a five years grace period.
Pakistan has asked for up to 90 per cent of financing and was ready to accept a 20 years repayment period, subject to the condition that the grace period should be 10 years.
The Chinese side proposed that negotiations for financing must be only to the extent of package-1 consisting of USD 2.434 billion and the negotiation for remaining two packages will be undertaken during the implementation phase of package-I, according to the official documents.
Pakistani authorities pressed for negotiation for the total project cost of the ML-1. China has also offered financing in Chinese currency Renminbi (RMB).
According to the ML-1 framework agreement, the project will be executed in the engineering, procurement and construction mode by Chinese contractors. Under the CPEC framework, ML-1 is the only strategic project being finalised as part of the initial USD46 billion deal.
Sources said that Pakistan's desire to start work on the package-1 from January 2021 would remain unfulfilled due to delay in finalisation of financing details.
Pakistan had planned to complete the package-I from January 2021 to December 2024 and will cover the construction of a 527-km track between Peshawar, Rawalpindi and Lahore, according to the paper.
The CPEC is part of China's One Belt, One Road initiative, a global infrastructure development strategy to invest in nearly 70 countries and international organizations. India has expressed concern over the projects as a portion of the CPEC runs through Pakistan-occupied Kashmir, violating Indian sovereignty.
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Former rapper Balendra Shah’s Rastriya Swatantra Party heading towards landslide victory in Nepal
Kathmandu (PTI): Rapper-turned-politician Balendra Shah's newly formed Rastriya Swatantra Party (RSP) was on Saturday heading towards a sweeping victory in Nepal's first general elections since the violent Gen Z protests, shattering the dominance of established political parties in the politically fragile nation.
According to the Election Commission's data available from 161 of the total 165 constituencies, the RSP has won 27 seats with a clean sweep in all 10 constituencies of Kathmandu district in the elections held on Thursday.
The Nepali Congress has secured victory in five seats, the Nepali Communist Party has won two seats and the Communist Party of Nepal (Unified Marxist–Leninist) has won one.
The RSP is leading in another 97 seats, the Nepali Congress, the Nepali Communist Party and CPN (UML) are leading on 10 seats each, while Shram Sanskriti Party is leading on five. Others are leading on two seats, according to the Election Commission figures till 10 am.
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Balendra Shah, who was the mayor of Kathmandu till recently, has secured 39,284 votes in Jhapa-5 constituency against four-time prime minister and CPN-UML chair K P Sharma Oli in the latter's stronghold. Oli has received 10,293 votes so far.
Popularly known as 'Balen', the 35-year-old engineer is expected to be the next prime minister of Nepal, reflecting a public mood of rejection of established parties. Nepal has had 14 governments in the last 18 years.
The election is being closely watched by India, which hopes for a stable government in the politically fragile Himalayan nation to take forward the developmental partnership between the two sides.
"We look forward to working with the new Government of Nepal to further build on the robust multifaceted ties between our two countries and peoples for mutual benefit," Ministry of External Affairs Spokesperson Randhir Jaiswal had said in Delhi on Thursday.
He said India has "consistently supported peace, progress and stability in Nepal and in keeping with our commitment, provided logistical supplies as per request from the Government of Nepal for these elections".
Out of a total of 275 members of the Parliament, 165 will be elected through direct voting, while the remaining 110 will be elected through a proportionate method.
In the Nepal elections, about 18.9 million voters were eligible to elect 275 members of the House of Representatives, with around 60 per cent of them turning out to vote on Thursday.
Around 3,400 candidates are vying for 165 seats under direct voting, and 3,135 candidates for 110 seats through proportionate voting.
The Gen Z youth, through their two-day intensified protests on September 8 and 9 last year, ousted Prime Minister Oli, who was heading a coalition government with the backing of Nepali Congress that enjoyed nearly two-thirds majority support.
Balen was a popular choice to lead the interim government after Gen Z youths toppled the Oli-led coalition government.
But Balen declined to lead the interim administration, saying he would rather head the government by contesting the parliamentary election for a full term.
In January, he joined the RSP, which was formed in 2022 by Ravi Lamichhane, and was soon declared the party's prime ministerial candidate. The RSP received significant support during the campaign.
Nepali Congress president Gagan Thapa was the prime ministerial candidate of his party, whereas the CPN (UML) projected Oli as its PM face. Both Nepali Congress and CPN (UML) were part of the government toppled by the Gen Z last year.
According to the Election Commission, Pushpa Kamal Dahal Prachanda won from Rukum Purba district. He secured 10,240 votes against his rival Lilamani Gautam of CPN (UML), who got 3,462 votes.
After Oli's ouster, President Ramchandra Paudel dissolved the House of Representatives on September 12 and appointed Sushila Karki as the caretaker PM.
The major issues raised by Gen Z are anti-corruption, good governance, an end to nepotism, generational change in political leadership, etc.
