Reuters file photo used for representation only

ISLAMABAD: China has halted funding of at least three major road projects that are part of the ambitious $60 billion China-Pakistan Economic Corridor ( CPEC ) deal, saying it would issue fresh guidelines for release of funds following allegations of corruption, leaving Pakistani officials “stunned”.

Pakistan was expecting that the funding of the projects would be cleared last month, but Islamabad was informed that Beijing would issue “new guidelines” under which the modalities for fund release would be described.

This is the second jolt to CPEC; the first one was when Pakistan had itself delinked the $14 billion Diamer-Bhasha Dam project from CPEC citing tough financing terms imposed by China.

Chairman of Pakistan’s Water and Power Development Authority Muzammil Hussain had told parliament that the Chinese company involved in the Diamer-Bhasha dam project had imposed tough financing conditions, which included pledging the new dam, as well as an existing dam, as loan security.

On Tuesday, a government official was quoted by Dawn as saying that the decision of the Chinese government was conveyed to Pakistan in the joint working group (JWG) meeting held on November 20, and that the existing procedure for release of funds had been abolished.

The official said Pakistan was left “stunned” when told of this development since it was the first time it was hearing it. He claimed that the Chinese side was “quite disturbed” with news reports in Pakistan regarding corruption in CPEC projects.

“The decision could affect over Rs 1 tn road projects of the National Highway Authority (NHA). It was not clear how wide the impact of the delay will be, but initial reports confirm that at least three road projects are going to experience a delay,” the Dawn report said.

The projects to be affected include the 210-km Dera Ismail Khan-Zhob Road, at an estimated cost of Rs 81 billion. Of this, Rs 66 billion will be spent on construction of road and Rs 15 billion on land acquisition. In addition, the Rs 19.76 billion 110-km Khuzdar-Basima Road has also been affected.

The Rs 8.5 billion 136-km remaining portion of Karakarom Highway from Raikot to Thakot will also be impacted. All three projects were originally part of the government’s own development programme, but in December 2016, the NHA spokesman announced that these are to be included under the CPEC umbrella to become eligible for concessionary finance from China.

The official said that funds for the three road projects were approved in the 6th joint cooperation committee meeting held last year, pending necessary procedural formalities.

It was expected that the funding of the three projects would be finalized during the November meeting of joint working group but Pakistan was informed in the meeting that ‘new guidelines’ will be issued from Beijing under which new modus operandi for release of the funds will be described.

Under the previous procedure, the projects were to be approved by six different forums after which the funds were released.

“In fact the Chinese authorities informed us that the previous procedure of release of funds was meant for early harvest projects only and new guidelines will be issued for future projects of the CPEC,” the official said.

This suggests that the impact of the new procedures could be much wider than just the three roads mentioned by the official.

