Green Asia

Indonesia expects to finalise $560 million railway loan from China next week

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JAKARTA : Indonesia expects to sign a long-delayed $560 million loan with China during the Belt and Road Forum (BRF) in Beijing next week, an Indonesian official said on Monday, with the amount slated to cover rising costs for its first high-speed railway project.

President Joko Widodo earlier this month launched the $7.3 billion railway, which connects the capital Jakarta to Bandung, even though funding was not fully secured due to the lengthy negotiations on the terms of the loan.

The project, being built by a consortium of Indonesian and Chinese state companies, is running $1.2 billion over budget, according to Indonesia’s government.

“Next week it should be done,” Kartika Wirjoatmodjo, deputy minister of state-owned enterprises, told reporters when asked about the status of the loan.

He said the signing may take place during the BRF, when Widodo and Chinese President Xi Jinping are expected to virtually inaugurate the bullet train’s commercial operations.

The new loan is in addition to a 2017 loan worth $4.55 billion that the China Development Bank has approved for the consortium. That loan has a 40-year tenure, with a 10-year grace period, and an interest rate of 2 per cent per annum

Indonesian officials have previously said Jakarta was seeking similar terms for the additional loan, but China had offered a higher interest rate of between 3.4 per cent to 4 per cent.

China has also asked for government guarantee for the additional loan, which the Indonesian government accepted in September after initially rejecting it.

The terms of the new loan have yet to be made public.

Asked how the money would be spent, Indonesia’s state railway company Kereta Api Indonesia, which leads the consortium behind the project, and spokesperson for the consortium did not respond to Reuters’ request for comment.

China’s BRF will be held in Beijing next week to mark the 10th anniversary of the Belt and Road Initiative.

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