ISLAMABAD: Pakistan’s military is taking a key role in the development of one of the world’s biggest untapped copper and gold deposits, which is currently stalled by a multi-billion dollar legal wrangle with foreign mining firms, multiple sources familiar with the situation said.
The Reko Diq mine has become a test case for Prime Minister Imran Khan’s ability to attract serious foreign investment to Pakistan as it struggles to stave off an economic crisis that has forced it to seek an International Monetary Fund bailout.
Ten current and former provincial and federal government officials and mining sources familiar with the project in the Baluchistan region say the military has become the most important voice on the future of Reko Diq, which it sees as a strategic national asset.
The military will not only be in a position to decide which investors develop the deposit, but an army-controlled engineering firm, Frontier Works Organization (FWO), is positioning itself to be a member of any consortium involved, these people said.
“This has been taken over by GHQ,” said a senior Baluchistan government official, referring to the Pakistan army’s General Headquarters in the garrison city of Rawalpindi.
In a statement in response to Reuters’ questions about its role in Reko Diq, the military spokesman’s office said: “(The military) may only participate in government’s plan of development of Reko Diq, as per national requirements.”
But it acknowledged that FWO, best known for building roads through Pakistan’s rugged and lawless border regions, has developed “substantial” mining capability in recent years and would be interested in taking a role in the project.
“If an opportunity arises of participating in developing Reko Diq, FWO may work at par with other competitors (or) companies provided the project is financially viable (or) suitable,” the statement said. When asked, a spokesman declined to elaborate on the statement.
Pakistan’s Information Minister Fawad Chaudhry said civilian authorities in the insurgency-hit southwestern province of Baluchistan were in charge of Reko Diq and, along with Khan, would take a decision, but added that the military “and all other stakeholders are obviously important players.”
FWO referred questions to the military spokesman’s office. Khan’s spokesman Iftikhar Durrani said Baluchistan province was in charge of Reko Diq, and referred questions to the provincial government and the military spokesman’s office.
The manoeuvring behind the project shows how the military, which has historically dictated Pakistan’s security and foreign policy, is leveraging its sway over the civilian government at federal and provincial level to carve a growing role in the nation’s business affairs.
“The military has taken a front seat,” said Ayesha Siddiqa, author of the book “Military Inc.,” which analyzes the army’s business interests and influence in Pakistan.
“They’ve understood that the economy is important for having a strong military,” she said. “Control of the economy also gives the military a handle over expanding their business interests.”
TALKS
Buried at the foot of an extinct volcano near the frontier with Iran and Afghanistan, the mine’s development has long been delayed by a dispute with previous investors in the project, Canada’s Barrick Gold and Chile’s Antofagasta.
The government is urgently trying to settle the dispute as a World Bank arbitration tribunal, which ruled against Pakistan in 2017, is in the next few months expected to announce how much in damages the country must pay to the foreign firms, who are claiming more than $11 billion.
The dispute relates to the withholding of a mining lease.
Islamabad is also trying to find new partners to invest in the project.
But any new investors will need the blessing of Pakistan’s military, according to government officials and mining sources.
State-run companies from resource-hungry China have long coveted Reko Diq and more recently Saudi Arabia has shown interest, according to Pakistani officials.
Some Western diplomats say the Reko Diq dispute has been a significant foreign investment deterrent, with international businesses unnerved at how Pakistan dealt with the companies that had pledged to invest $3.3 billion to develop the country’s then-biggest mining project.
Barrick Gold and Antofagasta, whose joint venture Tethyan Copper Company (TCC) discovered vast mineral wealth in Reko Diq, say they had invested more than $220 million by the time the Baluchistan government, in 2011, unexpectedly refused to grant them the critical mining lease needed to keep operating.
Pakistan argued its move was legitimate because TCC’s feasibility study was incomplete and the country’s Supreme Court voided the deal in 2013. But in 2017 the World Bank’s International Center for Settlement of Investment Disputes (ICSID) ruled against Pakistan.
TCC did not respond to requests for comment and Antofagasta and Barrick Gold both declined to comment. Reuters could not determine whether either company would be willing to return to the project.
FOREIGN INVESTORS
The last serious attempt at settling the Reko Diq case was scuppered in 2016 by the military, which vetoed paying hundreds of millions of dollars to TCC, according to a senior Baluchistan official and two former senior officials in Islamabad.
But the military has since changed its stance and is more open to a settlement with TCC, according to a lawmaker close to the military and a source close to Prime Minister Khan. The military was also involved in appointing Pakistan’s current legal team.
In response to a Reuters question about blocking the previous settlement effort, the military said: “Let’s see how the case progresses.” It did not elaborate or comment on whether it was playing any role in the latest negotiations.
Some mining experts say a likely solution would be for a new investment consortium to pay the settlement fee on behalf of cash-strapped Pakistan in exchange for future royalty fees or mining rights.
Information Minister Chaudhry said Pakistan was engaged in negotiations with “both” the current investors about a settlement and also potential new investors, with interest coming from the Middle East and Europe. He declined to name the potential investors.
Pakistani Finance Minister Asad Umar said in October that Saudi Arabia has inquired about investing in Reko Diq and another government official confirmed talks were ongoing.
Saudi Arabia did not respond to a Reuters request for comment on Reko Diq. During Crown Prince bin Salman’s visit to Pakistan last month, the kingdom pledged to invest $2 billion in mineral development projects, though the provisional agreements were vague and did not mention any specific projects.
China’s state-owned miner China Metallurgical Group Corporation (MCC), which operates the Saindak copper and gold mine close to Reko Diq, has been eyeing the bigger deposit for more than a decade, according to mining and MCC officials.
A few years ago Chinese state giant Norinco also made an approach, according to two sources familiar with Norinco’s offer.
MCC and Norinco did not respond to requests for comment.
When a mining company approached former general Abdul Quadir Baloch about Reko Diq around 2016, when he was federal minister for the frontier regions, he took their proposal not only to then-premier Nawaz Sharif, but also to the army chief.
“The military has to give a (security) guarantee to any company coming in to explore or exploit this project, so they are a stakeholder,” said Baloch.
The military declined to comment on Baloch’s assertions. Sharif, who has since been jailed on corruption charges, could not be reached for comment.
The army-run FWO does not have the funds or the expertise to develop the Reko Diq project, which boasts 5.9 billion tons of ore. But it could be part of a consortium alongside global miners who have the know-how to mine such a gargantuan deposit.
The military’s role in developing natural resources in Baluchistan also carries risks, however, analysts say.
Indigenous Baloch people view outsiders with suspicion, and their anger about Islamabad exploiting the province’s vast natural resources has been one of the key themes fueling a separatist insurgency that began around 2004.
Pakistan military eyes key role developing giant copper and gold mine
Pakistan military eyes key role developing giant copper and gold mine
- Buried at the foot of an extinct volcano near the frontier with Iran and Afghanistan, Reko Diq has world’s biggest untapped copper and gold deposits
- The project boasts 5.9 billion tons of ore inviting foreign investors
Pakistan secures $1.2 billion as IMF clears reviews, flags gains on stability and reforms
- IMF praises Pakistan’s policy implementation despite challenging global environment and climate-driven shocks
- The Executive Board urges faster energy, SOE and governance reforms for macroeconomic and fiscal sustainability
KARACHI: The International Monetary Fund (IMF) approved Pakistan’s second review under its Extended Fund Facility (EFF) and the first review of its Resilience and Sustainability Facility (RSF), said a statement on Tuesday, unlocking about $1.2 billion in new financing while praising the country’s progress in stabilizing the economy despite recent floods.
The decision taken by the IMF Executive Board allows Islamabad to draw $1 billion under the EFF and $200 million under the RSF, bringing total disbursements under both arrangements to about $3.3 billion. The Fund said Pakistan’s policy implementation had improved financing conditions, strengthened reserves and preserved stability even as the country faced a challenging global environment and climate-driven shocks.
Under the 37-month EFF, approved last year in September, the IMF noted strong fiscal performance, including a primary surplus of 1.3 percent of GDP, a rebound in gross reserves to $14.5 billion by end-FY25 from $9.4 billion a year earlier and progress on rebuilding confidence. It noted a surge in inflation due to flood-related food price spikes but said it was expected to ease.
“Pakistan’s reform implementation under the EFF arrangement has helped preserve macroeconomic stability in the face of several recent shocks,” IMF Deputy Managing Director Nigel Clarke said. “Real GDP growth has accelerated, inflation expectations have remained anchored, and fiscal and external imbalances have continued to moderate.”
Clarke said Islamabad’s commitment to meeting its FY26 primary balance target while also addressing urgent post-flood relief signaled strong fiscal intent. He urged continued tax policy simplification and base broadening to build space for climate resilience, social protection and public investment.
The IMF official maintained a tight monetary stance should be continued to keep inflation within the State Bank Pakistan’s target range, while allowing exchange-rate flexibility and deepening the interbank market.
Additionally, he said financial regulation enforcement and capital market development were essential for a resilient financial sector.
The IMF also flagged energy sector reforms as “critical to safeguarding viability,” noting that timely tariff adjustments had helped curb circular debt but that Pakistan must now focus on reducing electricity production and distribution costs and addressing operational inefficiencies in both the power and gas sectors.
The statement also welcomed the publication of Pakistan’s Governance and Corruption Diagnostic report, a detailed IMF-supported assessment that maps out where government systems are vulnerable to inefficiency or misuse and recommends reforms to improve transparency, accountability and service delivery.
Further priorities include the privatization of state-owned enterprises and strengthening economic data quality.
Clarke said reducing Pakistan’s climate vulnerability was vital for long-term stability, referring to the RSF, a financing tool that provides long-term, low-cost loans to help countries address climate risks.
“The RSF arrangement is supporting efforts to strengthen natural disaster response and financing coordination, improve the use of scarce water resources, raise climate considerations in project selection and budgeting, and improve the information on climate-related risks in financing decisions,” he said.
Pakistan faced a prolonged economic crisis in recent years before it began implementing stringent IMF-recommended reforms, which have driven a gradual improvement in macroeconomic indicators over the past two years.
The country also remains one of the world’s most climate-vulnerable nations despite contributing less than one percent of global greenhouse-gas emissions.
It has endured a series of extreme weather events in recent years, most notably the 2022 super-floods that submerged one-third of the country, displaced millions and caused an estimated $30 billion in losses.
This year’s floods killed over 1,000 people and caused at least $2.9 billion in damage to agriculture and infrastructure, underscoring the scale of climate pressures facing the economy.
Economic experts told Arab News a day earlier that the Fund’s disbursements under the two loan programs would support the cash-strapped nation, which has relied heavily on financing from bilateral partners such as Saudi Arabia, China and the United Arab Emirates, as well as multilateral lenders.
“It obviously will help strengthen the external sector, the balance of payments,” said Samiullah Tariq, group head of research at Pakistan Kuwait Investment Company.
Another analyst, Shankar Talreja, head of research at Karachi-based Topline Securities, said the move was likely to send a positive signal to domestic and international investors about the government’s commitment to its reform agenda.
“This will help strengthen reserves and will eventually help a rating upgrade going forward,” he said.
