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Govt allows state budget to guarantee loans for high-speed rail project
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The Jakarta-Bandung high speed train undergoes a comprehensive inspection on June 13, 2023. (Antara/KCIC)
T
he government will permit the use of state funds as a loan guarantee to sustain the Jakarta-Bandung high-speed railway (HSR) project, a decision that has been criticized for putting a heavy burden on the taxpayer.
The guarantee would enable the HSR project to receive sufficient debt financing to conclude cost overruns incurred during its development, according to Article 2 of Finance Ministerial Regulation No. 89/2023, which took effect on Sept. 11.
The guarantee would come from the government, along with PT Penjaminan Infrastruktur Indonesia (PII), a state-owned infrastructure project guarantor.
The regulation stipulates the guarantee will cover all financial liabilities, including the loan principal, interest and other additional costs that may be incurred through state-owned railway company PT Kereta Api Indonesia (KAI).
KAI is the leader of the Indonesian side that owns a 60 percent share in PT Kereta Cepat Indonesia Cina (KCIC), the consortium responsible for the project.
Read also: HSR to fall far short of passenger target in early phase
Bhima Yudhistira, executive director of the Center of Economic and Law Studies (CELIOS), said on Tuesday that the financial agreement for the HSR project had deviated a lot from the government’s initial promise that it would be limited to business-to-business with no state involvement.
