CNA – Indonesia expects to conclude negotiations with China in the coming weeks on an additional USD560 million loan for a high-speed rail project being built in the Southeast Asian country, a senior minister said yesterday.
The cost of the line linking the capital Jakarta with the textile hub of Bandung has overshot, pushing Indonesia to seek a new loan from the China Development Bank to help cover a USD1.2 billion cost overrun.
The total cost of the most high-profile Belt and Road Initiative (BRI) in Indonesia has now risen to more than USD7 billion, Indonesian officials have said
Senior Indonesian Minister Luhut Pandjaitan said during a trip to Beijing last week China had cut the interest rate on a proposed additional loan to 3.4 per cent, from four per cent previously.
The figure was, however, still above the two per cent rate Indonesia wanted, he said.
“We are finalising the interest rate. They’ve agreed below four per cent, but we want lower,” Luhut told a news conference.
The China Development Bank in 2017 had given a consortium of Indonesian and Chinese companies building the railway a USD4.55 billion loan with a 40-year tenure and a two per cent interest rate.
Negotiations would also continue on the loan’s maturity, Deputy Minister Septian Hario Seto said, adding Indonesia wanted it to be similar to the 2017 loan with a 10 to 15 year grace period. Furthermore, China wanted the Indonesian government to guarantee the loan and pass it on to PT KAI, one of the state-owned companies behind the project, while Jakarta preferred to appoint a company as a guarantor, Seto said.
China Development Bank could not immediately be reached for comment. Jakarta has insisted that Chinese finance for such projects be delivered on a business-to-business basis, amid accusations that some other countries hosting BRI projects have fallen into a debt trap.
Still, due to the cost overrun, Indonesia had to inject IDR3.2 trillion (USD214.77 million) of capital into PT KAI in January to help plug ballooning costs.
The railway is expected to operate commercially by August, Luhut said.
