The financing agreement details of the China-Kyrgyzstan-Uzbekistan (CKU) line have been revealed. The project is expected to cost 4.7 billion US dollars in total. According to Kyrgyz railway officials, China is expected to fund 51 per cent of the project’s costs with a loan of 2.3 billion US dollars.
Kyrgyzstan and Uzbekistan will need to fund the remaining 49 per cent of the project, covering 24,5 per cent of the expenses, respectively. As a result, each of the two countries will need to chip in with 783 million US dollars.
As it appears, Kyrgyzstan is unable to financially deliver its part at the moment, and as a result, it will need to rely on Chinese loans. In a question by the parliamentary committee for transport targeting the source of funds, Azamat Sakiyev, the general director of Kyrgyz Temir Jolu NC, replied that “the Kyrgyz Republic intends to borrow money from Chinese banks.” With this loan, the total amount of Chinese money flowing into the project will amount to approximately 3 billion US dollars.
The financing hurdle
China, Uzbekistan, and Kyrgyzstan agreed to build the CKU railway last week. The tripartite agreement document specifies that construction will begin in October. The agreement comes after the three countries long struggled with funding for the route. The expensive Kyrgyz section, through mountainous terrain, proved to be an obstacle.
As the latest news highlighted, Kyrgyzstan has to fund its own part. However, it has a large national debt and is legally barred from drawing too much money from a single international investor. It can legally borrow up to 45 per cent of its external debt from a single foreign source. The country already owes 42 per cent of its debt to China alone, and it will likely have to borrow from China again, even though it was reluctant to do so.