THE latest escalation in the cost of the first phase of the Reko Diq copper and gold project appears to reflect the concerns of the miner, Barrick Gold, over the potential risks to the scheme’s timely execution. On Friday, the government raised the cost to $7.7bn — a staggering 79pc increase over an initial estimate of $4.3bn made barely two and a half years ago. This is the second revision since March when the Economic Coordination Committee cleared a cost of $6.8bn on the basis of a technical study conducted by the miner. Media reports suggest that the fresh hike in the total cost, which includes $5.8bn in capital expenditure, is attributed to higher project financing needs, potential price shocks and contingency allocations to absorb price shocks during the mine development period.

While escalation in a large-scale mining venture is not something unexpected, the sheer size of the jump in mine development costs is mind-boggling and can be attributed to economic volatility and uncertainty in the country. The project’s strategic and economic significance for Pakistan, especially Balochistan, is immense. With lifetime net cash flows from the mine — which is expected to start commercial operations in 2028 — projected at $70bn, Reko Diq has the potential to provide a long-awaited boost to Balochistan’s underdeveloped economy while tackling Pakistan’s liquidity problems. Yet, the inclusion of $2bn in new financing requirements and a $390m sovereign-backed loan for railway connectivity underscores the heavy fiscal burden the state is assuming. Cost escalations, if not managed, could end up eroding much of the project’s prospective cash flow. Worse, delay in the project’s implementation can hold up the promise of prosperity for Balochistan’s people. That would only increase the province’s alienation from the state. If Reko Diq is to be the project that redefines Balochistan and Pakistan’s economic trajectory, it must be executed according to the given timelines, and without further cost escalation.

Published in Dawn, September 21st, 2025