China seeks additional guarantees from Pakistan before authorising $6 billion new loan for rail project

China has sought out additional guarantees from Pakistan for a new $6 billion for Main Line -1 (Ml-1) due to weakening economic position of Islamabad, Express Tribune reported on Wednesday.

As per the report, China has also proposed a mix of commercial and concessional loan against Islamabad’s desire to secure the cheapest lending.

The additional guarantees issue was raised during the third joint ML-1 financing committee meeting, according to an official document .

A senior Pakistani official confirmed the development saying that China did raise the issue but it did not make it part of the draft of the minutes shared with Pakistan, which is not yet being signed by both countries.

The project includes dualisation and upgrading of the 1,872km railway track from Peshawar to Karachi, and it is also the part of the China-Pakistan Economic Corridor (CPEC).

The purpose of raising the additional guarantees issue was getting more clarity after Pakistan availed G-20 countries debt relief initiative, he added.

The media outlet quoting its sources within the Ministry of Economic Affairs said that the third round of financial negotiations gave further clarity on the Chinese position on $6 billion lending for the $6.8 billion strategically important ML-1 project of Pakistan Railways.

The Chinese authorities asked for additional guarantee mechanism after Islamabad sought debt relief from G-20 countries, which was only meant for poorest nations of the world.

The Chinese authorities, keeping in view the financial situation in Pakistan, have proposed that 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 these negotiations.