ISLAMABAD: Pakistan announced that China will provide 85% financing for the realignment of the Karakoram Highway (KKH) and will support Islamabad’s plan to seek funds from multilateral lenders for the strategically important Main Line-1 (ML-1) railway project. This comes after Beijing declined to give Pakistan a concessional $6 billion loan for the rail project.
The decisions were made during the 14th Joint Cooperation Committee (JCC) meeting held in Beijing, co-chaired by Chinese Vice Chairman Zhou Haibing of the National Development and Reform Commission (NDRC) and Planning Minister Ahsan Iqbal.
China’s Special Support for KKH:
Planning Minister Ahsan Iqbal said after the meeting that both sides agreed to start bidding for the KKH realignment project in phases.
He confirmed that China will finance 85% of the project as a special case to maintain an all-weather road link between the two countries.
The realignment became necessary after parts of the highway were submerged due to the construction of major dams. The Thakot-Raikot section, stretching 241 kilometers, has been approved at a cost of Rs576 billion ($2 billion).
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In the first phase, work will begin on an 82-kilometer stretch submerged by the Diamer-Basha Dam. China also suggested that Pakistan should not store water in the dam until the new alignment is complete to avoid disrupting road connectivity.
Sources said that China urged Pakistan to carefully manage its public debt, which has now crossed Rs80.5 trillion, over 70% of GDP. While this issue was not formally discussed in the meeting, Chinese officials advised Islamabad to find new ways of financing projects without increasing its debt burden.
ML-1 Railway Project Moves Ahead:
Both countries agreed to move forward with the $7 billion ML-1 railway project through multilateral financing involving the Asian Development Bank (ADB) and the Asian Infrastructure Investment Bank (AIIB).
The Karachi-Hyderabad section will be the test phase of the project. Bidding and construction will begin once the financing plan is finalized. The project will be carried out in phases with a strong focus on railway safety.
Iqbal stressed the urgency of completing both the ML-1 and KKH realignment, calling them vital for uninterrupted connectivity and regional economic growth.
China also agreed to help Pakistan develop a climate resilience and preparedness plan. Both sides pledged to work together to revitalize Gwadar Port, a key part of the China-Pakistan Economic Corridor (CPEC).
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During the meeting, China agreed to hold fresh talks to revise the China-Pakistan Free Trade Agreement (FTA). The goal is to grant Pakistani exports the same tariff benefits as ASEAN countries, helping Pakistan expand its market access in China.
Iqbal noted that while China’s annual imports exceed $2 trillion, Pakistan’s exports to China are only $3 billion. He emphasized that boosting exports should be the main driver of Pakistan’s economic growth.
The discussions at the JCC highlighted both countries’ commitment to advancing CPEC projects, ensuring sustainable financing, and strengthening strategic and economic ties.
Iqbal concluded that the timely implementation of the KKH realignment and ML-1 project will bring far-reaching economic and strategic benefits for Pakistan and the entire region.
