Pakistan's ML-1 Railway Upgrade Faces a Funding Test as China Talks Open the Door to ADB

A $6.7 Billion Plan Meets a Railway in Financial Trouble

Pakistan's proposed upgrade of Main Line 1, the railway linking Karachi with Peshawar and branching to Havelian, faces an unresolved financing problem despite years of agreements and planning. As of December 2, 2025, the project is estimated to cost about $6.7 billion to $6.8 billion, while Pakistan Railways runs an annual deficit of roughly 55 billion rupees.

An Asian Development Bank fact finding team has inspected the Karachi to Rohri section and begun its own appraisal. Its involvement opens a possible route to funding part of a project originally conceived as a centerpiece of the China Pakistan Economic Corridor, or CPEC. Financing that section through the bank would also change how contracts are awarded and how environmental and social requirements are managed.

Pakistan Railways faces problems that extend far beyond the financing of one line. Between 45 percent and 90 percent of its network infrastructure is outdated or unusable. Bridges date back nearly a century, wooden sleepers have failed in many places, and nationwide service suspensions have occurred when the system could no longer function. Sleepers are the supports beneath the rails that help keep the track correctly positioned.

Freight, once the foundation of railway finances, has shrunk sharply. The Ministry of Railways puts rail's share of freight at about 70 percent in the 1960s, compared with only 2 to 3 percent today. Recovering some of that traffic could help pay for maintenance, but businesses need dependable services before they will move cargo back from roads to trains.

ML-1 therefore carries two connected tasks: rebuilding the country's main railway route and helping restore an institution whose losses and deteriorating assets make even routine operations difficult.

What the ML-1 Upgrade Would Build

The official project page describes an upgrade and doubling of about 1,730 kilometers of track. Doubling means providing two tracks so trains travelling in opposite directions can move with fewer waits for each other. The plan would raise operating speeds to between 120 and 160 kilometers per hour.

ML-1 also includes modern signaling and telecommunications, fencing along the railway corridor, and the replacement of dangerous level crossings with underpasses or flyovers. A level crossing is where a road crosses railway tracks at the same height. Separating the road and railway would reduce the risk of collisions, while fencing would limit trespass and theft.

A dry port near Havelian would provide an inland location for handling freight connected to the wider transport network. The project also includes upgrading the Walton Training Academy, preparing drivers, dispatchers, and maintenance workers to operate and look after the new systems.

The official brief gives a cost of around $6.7 billion to $6.8 billion and estimates that construction would support roughly 24,000 jobs. Pakistan Railways has outlined a target to raise line capacity from about 34 trains a day to nearly 100. Annual freight volumes would rise from roughly 8.5 million tonnes to about 30 million tonnes.

Those figures describe almost three times as many trains and more than three times the annual freight volume. The gains depend on track, signals, equipment, and staff being ready together. Faster trains and more reliable schedules would shorten important journeys by hours and help rebuild passenger confidence.

The Ministry of Railways argues that continued losses, safety risks, and declining assets will cost more than investment would save. It describes the project's importance in these terms:

ML-1 is not a luxury but a critical requirement for Pakistan's progress.

Years of Agreements, Followed by Redesigns

Pakistan and China have designated ML-1 a strategic scheme at the highest bilateral level. The project is divided into three packages, and a joint financing committee exists to conclude a concessional loan structure. A concessional loan generally offers softer borrowing terms, making repayment less demanding than under ordinary commercial financing.

The main planning milestones stretch back several years:

• 2017: Framework and commercial contracts were signed.
• 2020: Pakistan's Executive Committee of the National Economic Council approved a key planning document.
• By December 2, 2025: Comprehensive financing remained unresolved, while the Asian Development Bank had inspected Karachi to Rohri and begun its appraisal.

ML-1 was initially costed above $9 billion before being rationalized to around $6.7 billion. Several redesigns followed. Changes to the budget affected decisions about speeds, axle loads, line capacity, and the trains and wagons needed to use the upgraded railway.

An axle load is the weight carried through one axle onto the track. It matters for freight because heavier loads require track and structures capable of supporting them. Internal assessments flagged that some cost reductions could weaken performance if handled poorly. A cheaper design could leave the railway with less capacity than its customers need.

Why Financing Remains the Main Constraint

Pakistan sought external loans for as much as 85 percent of ML-1's cost. That leaves the project's progress closely tied to lenders' willingness to fund it and to the terms they offer. Cabinet level committees asked the Railways Division to return with firm financing options, tighter phasing, and clearer decisions about how the work would be packaged.

China pressed for cost control and showed interest in a limited first phase near Karachi. The comprehensive financing package remained unresolved. Security challenges and unpaid amounts owed to Chinese power producers complicated negotiations, while Pakistan's repeated fiscal strains and bailout cycles raised concerns about its ability to service debt.

Beijing has also been reassessing the risks of overseas projects. Large loans have slowed in countries facing instability or repayment pressure, and major CPEC schemes have progressed more slowly since 2019. These conditions make a single financing agreement for the entire railway upgrade harder to secure.

Pakistan's broader economic position leaves little room to absorb delays or higher costs. Growth has averaged 3 to 4 percent over the last two decades, inflation is near 11 percent, and the current account deficit has hovered around 2.3 percent of gross domestic product. The current account tracks transactions with the rest of the world, including trade and income flows.

Pakistan has frequently borrowed to cover routine expenses. Large numbers of skilled workers have emigrated, while floods have submerged tracks and damaged embankments. Tight public finances repeatedly push maintenance into the future, allowing damage to accumulate while the government searches for money for a major rebuild.

What ADB Participation Would Change

The Asian Development Bank's appraisal of Karachi to Rohri creates a possible alternative for a core part of ML-1. If the bank finances that section, delivery would follow multilateral rules, including international competitive bidding and tighter safeguards. No final financing decision or construction date was given.

International competitive bidding allows eligible companies to compete for contracts under the lender's procurement rules. That would be a change from the government to government awards used in early CPEC projects. Environmental and social safeguards would also shape project preparation and implementation.

Pakistani officials describe the aim as diversifying partners and reducing dependence on a single source of financing while keeping China involved. Chinese officials have signaled greater openness to participation by third parties in selected projects. This approach fits a wider effort to stabilize funding amid tight budgets and complicated geopolitics.

Chinese concessional loans have typically offered softer terms. Multilateral financing can carry higher interest costs, although it often includes technical assistance, procurement transparency, and environmental and social requirements that can reduce costs over a project's lifetime.

Competitive bidding can improve prices and designs. Preparation takes time, so an early phase may appear slow even while important engineering and procurement work is being completed. Better execution and stronger control of costs can outweigh that slower start over the medium term.

Why Karachi to Rohri Matters First

The Karachi to Rohri section connects ports, industrial activity, and densely populated cities. Choosing it as an early segment could direct investment toward freight routes and passenger services where delays have substantial economic costs.

Replacing dangerous crossings, fencing areas with high risks, and modernizing signals along this stretch would address several problems at once. Safer crossings would reduce collision risks. Better signals would help dispatchers manage train movements, while improved track and protection against intrusions would support more dependable operations.

Project planners also need to match axle loads and train control systems to heavy freight and container traffic. Train control systems organize and protect train movements. Choices that suit current and expected cargo demand would reduce the need to rebuild or replace equipment later.

Dividing ML-1 into manageable segments offers a practical way to proceed when money for the whole project is uncertain. The choice of segments will determine how quickly investment produces useful results. A section built without suitable wagons, trained staff, or reliable connections to terminals would struggle to deliver the promised traffic gains.

Ports, Minerals and the Case for More Freight

Rail can carry bulk goods at a lower cost per tonne kilometer than road trucking. A tonne kilometer means moving one tonne of cargo over one kilometer. Shifting some freight back to rail would reduce logistics costs for exporters and manufacturers, ease pressure on highways, lower oil imports, and reduce emissions.

Pakistan Railways' freight share has fallen to single digits. Winning back even a modest portion could generate income for maintenance and further improvements. That creates a direct connection between commercial recovery and the railway's physical condition: reliable services attract cargo, and cargo revenue helps keep services reliable.

A stronger ML-1 would connect Karachi and Port Qasim with the industrial heartland and the northwest. It could carry containers, agricultural shipments, and coal from Thar more efficiently. These flows require dependable schedules as well as sufficient carrying capacity.

The Reko Diq copper and gold project in Balochistan is expected to become a major export earner. Its projected volumes require dependable routes for heavy freight, while the current network lacks the necessary capacity and reliability. New mineral exports therefore make the condition of the wider railway network an economic concern beyond passenger travel.

Pakistan's position between South Asia, Central Asia, and the Middle East gives it the potential to connect markets. That potential depends on functioning railways, modern ports, and efficient roads. Geography offers a route on a map; transport infrastructure determines whether goods can actually use it.

A Regional Network That Has Frayed

Pakistan inherited an integrated network of road, rail, and port connections at independence in 1947. Railways built during British rule connected Karachi and Lahore with the wider region, including routes west through Quetta and Nokkundi to Zahedan.

Roads and passes connected Peshawar to Kabul and Quetta to Kandahar. Many of these established routes are now dormant or degraded after decades of neglect. Restoring a reliable main railway would be one part of rebuilding connections that once supported movement across the region.

Potential improvements include upgrading the Taftan to Zahedan railway toward Iran, improving links to Chabahar and Gwadar, and advancing the Pakistan Afghanistan Uzbekistan railway. Together, these connections could position Pakistan on a viable route between north and south.

Reopening established crossings such as Wagah Attari and Khokhrapar Munabao could expand trade further. Diplomatic conditions still determine whether borders are open for commerce, while transport capacity determines how much trade can move when they are. ML-1's economic value therefore depends partly on links beyond its own corridor.

Repairing the Existing Railway Alongside ML-1

Pakistan Railways cannot rely on a modern main line alone while the rest of its assets continue to deteriorate. Hundreds of unmanned or unsafe level crossings create risks for safety and reliability. Signals on many sections are obsolete, bridge condition data is patchy, and track geometry is inconsistent.

Track geometry describes the alignment and shape of the track. Keeping it within suitable limits is part of maintaining safe, dependable operations. Passenger discomfort and unreliable schedules also weaken confidence, making routine upkeep central to recovery rather than a secondary task.

A proposed starting point is a national transport policy supported by transparent data and measurable targets. It would set priorities across rail, roads, ports, and aviation, helping ensure that investment decisions work together rather than compete without a common plan.

The proposed governance approach calls for the Ministry of Railways, the transport ministry, and the planning ministry to establish a joint delivery unit. It would track milestones, assign responsibilities, and report progress to the prime minister. Dedicated maintenance funding and a performance framework based on service would reward reliability and safety.

Structural reform could separate infrastructure management from train operations and introduce an independent safety regulator. Vetted private freight operators could be allowed to use the network under open access terms, meaning agreed rules for running their services on the tracks, while Pakistan Railways concentrates on core services.

Dry ports and terminals could attract private investment through transparent, competitive concessions. These agreements would need clear performance standards and penalties, so commercial participation produces dependable services as well as investment.

Practical Priorities for the Next 24 Months

Immediate repairs and operational improvements could help stabilize the railway while financing for larger construction packages is settled. The proposed priorities concentrate on safety, busy freight routes, equipment, staff, and public reporting:

• Replace the most dangerous level crossings along ML-1 corridors with underpasses or flyovers, starting near major cities.
• Complete fencing and protection against intrusions on sections with high risks to reduce accidents and theft.
• Prioritize track renewal and bridge rehabilitation on Karachi to Rohri and Rohri to Khanewal, where expected returns are highest.
• Modernize signaling and telecommunications on priority segments to make schedules more dependable and increase throughput.
• Refit freight wagons for higher axle loads and launch targeted services carrying cement, grain, and containers.
• Upgrade the Walton Training Academy to retrain drivers, dispatchers, and maintenance workers for new systems.
• Publish quarterly dashboards covering punctuality, accidents, asset condition, and freight volumes.

These measures are proposed priorities rather than an announced construction timetable. Their shared purpose is to improve the railway's ability to operate safely and earn revenue during the longer process of rebuilding its main route.

Currency, Security and Flood Risks

ML-1 would earn revenue in rupees, while much of its financing would be in foreign currency. If the rupee loses value, the railway would need more rupees to meet the same foreign currency repayment. That pressure could squeeze finances and force increases in passenger fares or freight charges.

Possible responses include hedging, which uses financial arrangements to limit exposure to exchange rate changes, and a gradual move toward domestic currency financing for later packages. Stronger operating income from freight would also help support repayments and maintenance.

Security threats create another practical constraint. Attacks on workers or infrastructure delay construction and increase costs. Protecting sites and routes, alongside engagement with communities along the railway, needs to be included in the engineering and delivery plan.

Floods have already inundated tracks and washed out embankments. Higher embankments, improved drainage, and materials able to withstand heat and water are proposed elements of a more resilient design. Rebuilding without addressing these risks would leave the railway exposed to repeated damage and disruption.

Operational readiness completes the picture. New bridges, tracks, and signals deliver their intended value only when crews and equipment can use them properly. Training, suitable trains and wagons, and new maintenance routines need to be in place before each segment opens. The Walton Training Academy upgrade is therefore part of making the investment work, alongside concrete and steel.

Key Points

• Pakistan Railways runs an annual deficit of roughly 55 billion rupees, with extensive deterioration across its infrastructure.
• ML-1 would upgrade and double about 1,730 kilometers between Karachi and Peshawar, with a branch to Havelian, at a planned cost of about $6.7 billion to $6.8 billion.
• The project targets speeds of 120 to 160 kilometers per hour, nearly 100 trains a day, and about 30 million tonnes of annual freight.
• Agreements signed in 2017 and planning approval in 2020 have been followed by redesigns and unresolved comprehensive financing.
• ADB has inspected Karachi to Rohri and begun appraisal; financing through the bank would bring competitive procurement and tighter safeguards.
• Freight recovery could support ports, agriculture, Thar coal, and mineral exports including Reko Diq, while generating revenue for upkeep.
• Maintenance funding, safer crossings, stronger governance, trained crews, and suitable equipment remain essential alongside construction.
• Foreign currency debt, security threats, and damage from floods are central risks for financing and delivery.