Pakistan cuts Chinese “Silk Road” rail project by $2 bln due to debt concerns

The changes are part of Islamabad’s efforts to rethink key Belt and Road Initiative (BRI) projects in Pakistan, where Beijing has pledged about $60 billion in financing but the new government of populist Prime Minister Imran Khan appears to be more cautious about the Chinese investment. (AFP/File)
Updated 01 October 2018

Pakistan cuts Chinese “Silk Road” rail project by $2 bln due to debt concerns

  • The megaproject was initially priced at $8.2 billion
  • “Pakistan is a poor country that cannot afford huge burden of the loans,” Railways Minister Sheikh Rasheed told a news conference in the city of Lahore

LAHORE: Islamabad has cut the size of the biggest Chinese “Silk Road” project in Pakistan by $2 billion, Railways Minister Sheikh Rasheed said on Monday, citing government concerns about the country’s debt levels.
The megaproject to revamp the colonial-era line stretching 1,872 km (1,163 miles) from Karachi to the northwestern city of Peshawar was initially priced at $8.2 billion, but wrangling over costs has led to delays.
The changes are part of Islamabad’s efforts to rethink key Belt and Road Initiative (BRI) projects in Pakistan, where Beijing has pledged about $60 billion in financing but the new government of populist Prime Minister Imran Khan appears to be more cautious about the Chinese investment.
“Pakistan is a poor country that cannot afford huge burden of the loans,” Rasheed told a news conference in the city of Lahore.
“Therefore, we have reduced the loan from China under CPEC for rail projects from $8.2 billion to $6.2 billion,” he added, referring to the China-Pakistan Economic Corridor (CPEC).
Rasheed said the government remains committed to the Karachi-Peshawar Main Line-1 (ML-1) project but added that he wishes to further reduce the cost to $4.2 billion from $6.2 billion.
Islamabad has balked at the financing terms and has pushed for deeply concessional loans for ML-1. It also invited third countries to join or for the Chinese to be investors in the project through the build-operate-transfer (BOT) model that would rely less on debt.
The United States has criticized BRI projects, warning that the loans could turn into debt traps for poor countries unable to pay them money back. Beijing denies the claims, saying the loans are a win-win situation for both countries.
“CPEC is like the back bone for Pakistan, but our eyes and ears are open,” Rasheed said.
The ML-1 is the spine of the country’s dilapidated rail network, as well as the biggest source of revenue. Pakistan’s rail system has struggled to break even for decades as passenger numbers plunge, train lines close and the vital freight business nosedives.


Western Union closes Cuba offices close as sanctions bite

Updated 24 November 2020

Western Union closes Cuba offices close as sanctions bite

  • Money transfers from the US via Western Union were estimated at more than $1 billion last year
  • Current options for remittances include agencies that hire ‘mules’ to fly out to Cuba with cash

HAVANA: Western Union suspended its operations across Cuba on Monday evening as new US sanctions kicked in, cutting a key lifeline for many struggling Cuban families as the coronavirus pandemic deepens the Communist-run island’s economic crisis.
US President-elect Joe Biden has promised to roll back some sanctions on remittances. But any lifting of the suspension could take time and until then, Cuban Americans are expected to resort to alternatives that are more costly, less secure and less rapid.
Remittances to Cuba are believed to be around $2 billion to $3 billion annually, representing its third biggest source of dollars after the services industry and tourism.
Money transfers from the United States via Western Union were estimated at more than $1 billion last year, the majority of which was sent from Florida, according to John Kavulich, president of the US-Cuba Trade and Economic Council.
Current options for remittances include agencies that hire “mules” to fly out to Cuba with cash and which predate Western Union’s start in Cuba 20 years ago, as well as companies that transfer dollars to Cuban accounts – though that money can only be used at state stores.
Cryptocurrency exchanges are also promoting themselves as an alternative. Cuban Americans can transfer digital currencies to middle men on the island who then give money to the Cuban Americans’ relatives.
But such platforms lack oversight, cryptocurrencies can fluctuate rapidly and unexpectedly in value and Internet access is still not a given in Cuba, Kavulich said.
“We’ve looked but there are no safe services,” said local resident Arturo Labaut.
The closures of Western Union’s 407 offices in Cuba came into effect after US President Donald Trump’s administration banned US firms sending remittances via military-controlled companies that include Western Union’s main Cuban partner.
His administration has also previously capped the amount Cuban Americans can send family members at $1,000 per quarter, and transfers of money to non-family members are no longer allowed.
The new ban comes just as Cuba has started enacting structural reforms to revive its state-run economy which have been long called for but which will spell pain for its residents in the meantime.
“It’s a bad time to be doing this because of the suffering it will cause,” said Florida International University professor Guillermo Grenier.
“It’s not governments that suffer, it’s people.”