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Due to Pakistan’s poor financial situation, China has requested additional guarantees before approving a £ 6 billion loan for the country’s Main Line 1 (ML-1) railway project. On Wednesday, China proposed a joint commercial and concessional loan to finance the rail project. On the other hand, Pakistan expected loans at low interest rates.
Since Pakistan’s economic situation is not strong, China has said that it will make loans only on the basis of a firm guarantee. Pakistan claims that China wants this guarantee at the Main Line-1 project funding meeting, but it was not mentioned in the final report of the meeting with Pakistan at the beginning.
The ML-1 project will upgrade the railway line from Peshawar to Karachi. Pakistan applied for a loan from China for this project. But China has demanded higher interest rates, as well as a firm guarantee.
A Pakistani official said Pakistani officials present at the meeting were pleasantly surprised when collateral was requested for a loan. However, China said that given the economic situation in Pakistan, Pakistan should guarantee a loan.
Pakistan had expected China to make a loan at an interest rate of 1 percent and give it 10 years to repay the loan. But China has completely diluted Pakistan’s hopes. Pakistan had requested a 90 percent loan from China for the project. But China says it will be able to pay 75 percent.
Source: Economic Times.
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