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Chinese debt to Pakistan: China shows Imran Khan’s indigence in Pakistan, demands additional collateral before loan – China seeks additional collateral before sanctioning loan for Pakistan railway project

Islamabad
China asked for additional guarantees before approving the $ 6 billion loan for the main railway project, given Pakistan’s poor economic situation. Through this project, the doubling of the 1,872 km railway route from Peshawar to Karachi and the repair of the tracks are to be carried out.

Pakistan’s economic situation is dire
Pakistan’s already weak economy has also suffered a major setback due to the corona virus. For this reason, a few days before, Imran Khan demanded debt relief from the G20 countries. China is frightened by this decision of the Pakistani government, so it asked for a guarantee for the loan. In addition, China has offered to provide this loan amount in two parts, commercial and concessional.

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A media report said China had offered to provide commercial and concessional loans to finance the rail project. Wherein Pakistan will have to pay more interest on commercial loans. According to the “Express Tribune”, the issue of the additional guarantee was raised at a meeting of the joint finance committee 10 days ago (December 13) for the main railway project.

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China did not mention the warranty in the official document
A senior Pakistani official involved in the meeting said China had raised the issue of additional guarantees during the talks, but was not included in the draft document of details shared with Pakistan. The two countries have not yet signed the papers. The Main Line-1 project involves the doubling of the 1,872 km railway route from Peshawar to Karachi, the repair of the tracks and is crucial for the second phase of the China-Pakistan Economic Corridor (CPEC).

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China fears Pakistan’s demand for debt relief
The official said Pakistan had asked for debt relief from G20 countries. For this reason, China has raised the issue of additional guarantees to clarify the country’s economic situation. Sources at the Ministry of Finance said that during the third phase of negotiations on financial matters, the situation was clarified regarding the loan of six billion dollars for the project.

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For this reason, Pakistan cannot take out commercial loans.
As part of the debt relief of the G-20 countries, Pakistan cannot contract commercial loans at higher rates except with the prior approval according to the project of the International Monetary Fund and the World Bank . This year, in August, the Executive Committee of the National Economic Council (ECNEC) approved the strategically important project of Main Line 1 to be built at a cost of 6.8 billion dollars.

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There is no China-Pakistan debt discussion
The ECNEC meeting lasted only 20 minutes and the financial and technical issues were not resolved. Sources said Pakistan wanted to get $ 6 billion at a 1% interest rate, while China offered loans in commercial and concessional categories.

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