The long-planned and highly publicized Belt and Road project in Kazakhstan has reportedly hit a roadblock after the China Development Bank announced that it would be pulling its funding. The plan involved a massive light-railway system that was estimated to cost around $1.9 billion. The railway project was supposed to start operations in 2020, but it seems like that is not going to happen.
In the capital city of Nur-Sultan, concrete columns around the metropolis are the only evidence left of the massive undertaking. Work on the railway has apparently now come to a standstill following the collapse of the domestic bank where the money for the project was deposited.
Kazakhstan previously turned to China to take advantage of President Xi Jinping's ambitious infrastructure project. China gave the country billions of dollars in investments, in an attempt to help it restart its economy.
Unfortunately, Kazakhstan was met with a series of events that saw the country's economic growth stagnate at 1 percent in 2015 and 2016. This eventually led to a dramatic fall in the country's banking sector, leading to closures of even the biggest of domestic operators.
According to a statement received by the media from the Nur-Sultan's mayor's office, China apparently halted its funding for the project citing that some of the money that was given was reportedly not spent on the project. Funds from China was sent by the China Development Bank, which deposited the money to the state-owned firm TOO Astana LRT. In turn, Astana LRT deposited the funds it received to the Bank of Astana.
China apparently found out that the funds in the Bank of Astana were not disbursed, eventually leading to its decision to cut funding. Astana LRT was supposed to use the money to pay a consortium of Chinese companies that were contracted to construct the light-rail project.
It also didn't help that the central bank had revoked Bank of Astana's license late last year. The bank was forced to transfer the liabilities of its deposits the Finance Ministry's Problem Loan Fund.
Following the series of events, Kazakh officials had pledged to China that it would repay the loan that was given to them by China Development Bank. So far, the Finance Ministry's Problem Loan Fund has been able to released around $8.6 million to pay the project's contractors.
Kazakhstan is reportedly also now working with the Chinese bank to restructure its loan. Officials assured the public that it would still be able to complete the project by sourcing funds domestically.
