$1 billion MFF for railway mainline: ADB to co-finance projects with China’s lenders in Pakistan

The Asian Development Bank (ADB) plans to work with China’s lenders to jointly finance railway network and other projects of regional connectivity in Pakistan, sources said on Tuesday.

Sources said Manila-based ADB is considering $1 billion loan under multi-tranche financing facility (MFF) for upgrading Mainline (ML-1) along with Chinese financing of $5.5 billion.

“The ADB top team is scheduled to visit Islamabad next week for finalising funding for railway network and other projects of regional connectivity,” a source said.

Under the ADB’s umbrella, the initiative of Central Asia Regional Economic Cooperation (CAREC) programme has diverted its focus on improving rail linkages among the regional states, and a high-powered mission, led by its DG Safdar Pervez, is scheduled to visit Pakistan next week for finalising the rail investment programme.

“The ADB may withdraw its proposed funding, as some Chinese banks may overtake this whole initiative related to Pakistan Railways because they want to accomplish this project as early as possible,” said an official at the Economic Affairs Division (EAD). The official also said “things would be finalised after holding consultations with the upcoming CAREC mission of the ADB’s top officials.”

The ADB’s working done so far stated that the proposed MFF will improve the railway sector in Pakistan by making the railway transport system more efficient and competitive.

The outcome will be improved railway corridor of Lahore-Peshawar and improved institutional efficiency. The outputs will be (i) approximately 411 kilometres of upgraded and dualised railway track for the Lahore-Peshawar section of ML-1 together with new signalling and telecommunications system (including power supply for these systems) and upgraded passenger facilities at Lahore, Rawalpindi, and Peshawar stations; (ii) 52km of newly constructed double-track rail line linking Kaluwal and Pindora; and (iii) Pakistan Railway’s modernised and IT-based accounting system, and the accounting data and information transformed and migrated into the new accounting system.

ADB views that despite recent improvements, the railway sector needs to upgrade its infrastructure on a large scale to provide more competitive transport services, regain the market share lost to roads, and ultimately rebalance the unbearably unbalanced modal share between rail and road in the country.

The MFF would be aimed at rehabilitating and dualising the Lahore-Peshawar (460 Km) railway track with realignment of its 53 kilometre section in the hilly tract from Kaluwal to Pindora. Except for the realignment sections of the hilly tract, it was likely that all works for rehabilitation and up gradation of the physical infrastructure would be limited to the PR owned right-of-way.

Under the proposed MFF, tranche-1 would include rehabilitation and dualisation of the 173 kilometre railway track from Peshawar to Rawalpindi with installation of modern signalling and communication systems.

Pakistan Railway’s secured right-of-way (30 to 50 meter in average for plain and hilly regions) was adequate for smooth execution of the project works, but at two locations in the hilly region, proposed new tunnels for double track might require realignment of the approaching tracks.

This would necessitate permanent acquisition of right-of-way through uninhabited hilly land, which was mostly state-owned.

In other areas, the impacts could be particularly along the existing railway stations or in the areas where the railway tracks passes through settlements or at level crossing locations.

Nonetheless, such impacts would mostly be limited to the railways owned infrastructure, and it could be that the right-of-clearance in such areas would impact about 15 residential and commercial structures.