According to the proverb, “there’s many a slip between cup and lip,” the Main Line-1 rail track project, which runs from Peshawar to Karachi, has once again run into difficulties. The third Belt and Road Initiative Forum is being held in Beijing this week, and it was previously reported that Pakistan and China were expected to formally announce and sign an addendum to the revised ML-1 framework agreement during the event. However, Pakistan’s finance ministry has attempted to temper those expectations. Despite the fact that the project’s cost has been reduced by 32% from the initial estimate of $9.85 billion, an official told the media that the project still needs to be approved by the IMF and that the finance ministry must be able to offer sovereign guarantees for a $6.67 billion loan from China. The government is prohibited from issuing sovereign guarantees that exceed 2% of GDP annually by the lender’s criteria. Even with the downward cost adjustment, the ML-1 loan is broadly within this range. Since it was first agreed upon in 2017, the ML-1 project has repeatedly been delayed owing to cost increases, Covid-19, internal political instability, disagreements over financing costs, the liquidity constraint, and security concerns involving Chinese workers. The project is crucial for Pakistan and its economy. Further delays are expected to lead to cost overruns once more and require Pakistan to make additional design, scope, and quality compromises.
However, ML-1 is not the only transport undertaking dealing with delays and rising costs. The National Highway Authority is considering terminating the contract it signed with a group of domestic and foreign businesses on some technical grounds, which could cause further delays on the 306km-long Hyderabad-Sukkur Motorway (M-6), the last missing link in the chain of motorways connecting Peshawar to Karachi. These projects’ delays highlight two important problems: first, Pakistan’s dependence on foreign loans for infrastructure development due to its ongoing fiscal issues; and second, the inability of government departments to effectively plan and design a scheme, as well as draught and award contracts that safeguard the public interest rather than the profits of the contractors. Our infrastructure plans will continue to experience delays and cost overruns unless we address these issues.