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Indonesia Wants China to lower loan interest for high-speed train project

Jakarta Globe - April 10, 2023

Jayanty Nada Shofa, Jakarta – Chief Investment Affairs Minister Luhut Binsar Pandjaitan said on Monday that Indonesia had been negotiating with China to lower the loan interest rate to cover the cost overrun of the Jakarta-Bandung high-speed train project.

Indonesia and China have agreed on $1.2 billion for the cost overrun of the railway project. The Indonesian government is currently proposing an estimated $560 billion loan at a 2-percent interest rate from China Development Bank (CDB) to pay the budget overrun. Just last week, Luhut visited Beijing in hopes of a slash in the loan interests, among other things.

"We are currently finalizing the interest for the loans on the project's cost overrun," Luhut told a press briefing in Jakarta.

"[China] is already willing to bring the interest down from 4 percent. The first offer is a reduction from 4 percent to 3.4 percent, but we want it to be even lower," Luhut said.

Indonesia and China are expected to wrap up the loan negotiations in the coming weeks.

"We do want a 2 percent interest, but it is impossible to have everything [we want] come true. If you ask for loans [outside China], the interest can go up to 6 percent. So if we end up with a 3.4-percent rate, we are doing okay, although not that okay. But that would be better than [borrowing money from other countries]," Luhut said.

The minister told reporters that Indonesia would not have any trouble paying the loans if the CDB charges a 3.4 percent interest.

"Do not underestimate our country. We are getting better. Our state tax revenue has grown by 48.6 percent [in Jan. 2023] thanks to better efficiency with digitalization, etc," Luhut said.

The Jakarta-Bandung railway project will kick off operations on Aug. 18, 2023 – just a day after the 78th anniversary of Indonesia's independence day. Trial runs will begin next month.

Source: https://jakartaglobe.id/business/indonesia-wants-china-to-lower-loan-interest-for-highspeed-train-projec