Government mulls financial options for LRT projects

As the state budget is unlikely to be able to completely cover light rail transit (LRT) projects, the government is considering a number of options to finance the two transportation projects in Palembang, South Sumatra, and Greater Jakarta.

“The package may use a government guarantee mechanism or it will come from state funds through public service obligations,” State-Owned Enterprises Minister Rini Soemarno said in Jakarta on Wednesday as reported by tempo.co.

“The government is studying several financial structures, including the issuance of sukuk [Islamic bonds]. State-owned companies will issue sukuk with a guarantee from the government so the interest will be lower,” she added.

(Read also: Government turns to LRT contractor for funding)

Meanwhile, the Transportation Ministry has proposed that the project use a multiyear allocation for 10 years with a scheme in which the developer is responsible for seeking financial resources. The other option is to seek loans from state-owned lenders.

Rini said the preferred option, particularly for the Jakarta project, would be chosen within days.  

The two LRT projects are set to cost more than Rp 30 trillion (US$2.25 billion). The state budget, however, cannot cover all costs for the projects.

Coordinating Maritime Affairs Minister Luhut Binsar Pandjaitan said financial problems would not affect the project in Palembang, where the LRT was expected to operate by August 2018. The Greater Jakarta LRT, he added, would be operational in the first half of 2019 as the government was still discussing financial resources. (bbn)