The ML-1 railway upgrade project, which Pakistan has waited for a decade, has been removed from the China-Pakistan Economic Corridor (CPEC), and China will no longer provide unconditional financial guarantees. In response, Pakistan is now reluctantly seeking loans from the U.S. and Japan. Recently, the Pakistani parliament announced that the long-delayed ML-1 railway upgrade project—delayed for a full ten years—will finally be launched this year.

This major north-south railway artery, stretching from Karachi to Peshawar, was once the flagship project of the CPEC. The vision was ambitious: after renovation, its transport capacity would multiply several times over, meeting nearly 20% of the country’s transportation needs. But reality proved harsh—the project hadn’t even begun construction, yet the issue of funding had already surfaced.

The initial budget was staggering, and disagreements between China and Pakistan over financing mechanisms persisted for years. Pakistan wanted China to offer large-scale preferential loans, but China’s overseas investment strategy has evolved in recent years—it no longer provides one-sided guarantees and instead emphasizes the project’s own repayment capability, urging Pakistan to seek support from international financial institutions to share the burden.

To move forward, Pakistan has cut costs and adopted phased construction. The first phase focuses on the busiest southern section, where the Asian Development Bank has agreed to provide the bulk of the loan. However, a significant remaining amount still lacks a source of funding.

A bigger shift occurred this summer: the ML-1 project has been officially removed from the CPEC framework, with no new funding commitments from China. Pakistan finds itself unable to request more funds, nor can it finance the project itself. The railway authority applied for substantial funding, but the approved amount was drastically reduced. After accounting for other essential expenditures, the actual disbursement for the ML-1 project is merely a drop in the bucket compared to the massive funding gap.

Pakistan’s fiscal situation is indeed dire—its debt levels are high, and it barely survives each year by rolling over debts from China, Saudi Arabia, and other countries. While Saudi Arabia has provided financial support in the past, it came with security commitments and risks pulling Pakistan into regional conflicts. Meanwhile, Pakistan adheres to a policy of balancing relations among major powers, making it increasingly difficult to secure large-scale financing from the U.S. or Japan, as such loans typically come with political conditions.

The plight of the ML-1 project reflects a profound shift in the China-Pakistan economic cooperation model. China is no longer offering unconditional backing; instead, it prioritizes commercial viability and diversified financing. For Pakistan, this presents both pressure—and an opportunity to push forward fiscal reforms.

There’s no lack of ambition for the railway, only a shortage of accompanying fiscal capacity. After waiting ten years, Pakistan is eager to start construction—but the funding gap won’t vanish simply through slogans. China’s adjustment in cooperation isn’t abandonment of Pakistan, but rather a return to a more rational and sustainable partnership. What Pakistan must do now is accelerate economic reforms, enhance the project’s attractiveness to investors, and leverage Chinese expertise to strengthen its own self-sustaining capabilities.

Whether this railway will ultimately be completed may not depend on engineering challenges—but on Pakistan’s ability to govern its economy effectively.

Original article: toutiao.com/article/1875816393401611/

Disclaimer: The views expressed in this article are solely those of the author.