For years, Pakistan has survived by moving from one lender to another with its perpetual cup-in-hand approach. Its economy remains chronically dependent on external financing, whether from the International Monetary Fund (IMF), the Asian Development Bank (ADB), or Gulf monarchies. But now even China, which has long been celebrated in Islamabad as an “ironclad brother” is now showing hesitation.
The latest example is the $7 billion Mainline-I (ML-I) railway project between Peshawar and Karachi, which has stalled after Beijing declined to release promised funds. The setback has once again exposed Pakistan’s inability to fund large infrastructure projects without foreign bailouts.
The ML-I project and China’s retreat
The ML-I railway line was declared the single most “strategically important” venture under the China-Pakistan Economic Corridor (CPEC). Pakistan expected Beijing to cover 85 percent of the nearly $10 billion cost through a concessional loan. But China balked at the terms, insisting Pakistan scale down costs to around $6.7 billion. Even then, Beijing refused to extend loans at softer rates, forcing Islamabad to look elsewhere.
In desperation, Pakistan turned to the ADB and the Asian Infrastructure Investment Bank (AIIB). Reports suggest the ADB is considering financing only a portion of the project, beginning with the Karachi-Rohri section. Islamabad has asked for complete financing, but the lenders have agreed to cover just 60 percent of the first stretch, roughly $1.2 billion. The ADB has also demanded revised design documents and has linked funding to the outcomes of a Project Readiness Facility, which will review feasibility, detailed design, and actual cost estimates.
The railway’s Karachi-Rohri section, expected to cost $2 billion, is vital for transporting copper and gold from the Reko Diq mines once they begin production in 2028. Pakistan’s hope of holding a groundbreaking ceremony in June next year is already fading, with ADB sources pushing the timeline to December. What was once China’s flagship CPEC project is now moving ahead only with conditional multilateral support.
Mining ambitions, debt burdens and ADB’s deeper role
Pakistan is pinning its hopes on the Reko Diq copper-gold mine, one of the world’s largest untapped reserves, to escape its debt trap. ADB has already approved $410 million in financing for Reko Diq, comprising $300 million in loans and a $110 million guarantee for the government. This marks the bank’s first mining sector investment in over four decades and signals a shift toward bolstering critical minerals needed in the global energy transition. Pakistan’s army chief sees this mine as key to confronting its $130 billion debt load, and officials are pursuing backing from other institutions, including the U.S. Export-Import Bank and Japan’s JBIC.
A habitual dependence on loans
The ML-I episode is hardly an exception. Pakistan has long relied on external financing to plug its deficits and fund development. Its relationship with the IMF has been particularly prominent, with Islamabad repeatedly turning to bailout packages to avoid default. The cycle is predictable: Pakistan borrows, spends recklessly, struggles to repay, and then borrows again.
Beyond the IMF, Islamabad has leaned heavily on China, Saudi Arabia, and the United Arab Emirates. Beijing has already poured billions into Pakistan through CPEC loans, but these funds have created more debt than growth. Gulf monarchies, meanwhile, provide lifelines in the form of deposits and deferred oil payments. None of these inflows have been used to build sustainable revenue streams or reforms. Instead, they only delay a looming collapse.
India’s objections to financing Pakistan
New Delhi has consistently objected to loans extended by global institutions like the IMF and ADB to Pakistan. The Indian government has argued that these funds, rather than being deployed for genuine development, are often diverted to support terror infrastructure. Past intelligence assessments and international reports have indicated Pakistan’s military establishment continues to bankroll extremist groups while simultaneously seeking fresh aid from multilateral agencies.
This contradiction has only grown sharper in recent years. Even as Islamabad insists on more funds to modernise railways, electricity, and industry, its soil remains a hub for groups that destabilise the region. By bailing out Pakistan without accountability, institutions like the IMF and ADB risk indirectly enabling the same system that sustains terror networks.
Seven years late and still unfunded
The ML-I railway illustrates Pakistan’s financial dysfunction. More than seven years after it was first announced, the project has yet to begin. Costs continue to spiral, lenders demand feasibility studies, and timelines keep slipping. The refusal of China, once hailed as Pakistan’s “all-weather friend,” to finance the project on Islamabad’s terms underscores how even Beijing is growing weary of Pakistan’s demands
Pakistan’s leaders insist that ML-I will be crucial for economic revival, pointing to projects like Reko Diq that need transport infrastructure. But without a clear financing plan, the venture risks becoming another addition to Pakistan’s long list of stalled mega-projects.
A country living on borrowed time
Every new loan comes with conditions, costs, and rising debt obligations. Pakistan’s habit of seeking foreign lifelines rather than reforming its domestic economy is deepening its dependency. With China now pulling back, and with ADB and AIIB only cautiously committing funds, Pakistan is left with few options.
Rather than building financial independence, Islamabad continues to survive on loans. Its dependence on external bailouts is no longer just an economic problem but a geopolitical liability. Even its closest allies are beginning to ask the same question: how long can Pakistan keep borrowing before it finally collapses under its own weight?
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