KONTAN.CO.ID - JAKARTA. Indonesia expects to conclude negotiations with China in coming weeks on an additional $560 million loan for a high-speed rail project being built in the Southeast Asian country, a senior minister said on Monday.

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 $1.2 billion cost overrun.

The total cost of the most high profile Belt and Road Initiative (BRI) in Indonesia has now risen to more than $7 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%, from 4% previously. The figure was, however, still above the 2% rate Indonesia wanted, he said.

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"We are finalising the interest rate. They've agreed below 4%, 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 $4.55 billion loan with a 40-year tenure and a 2% interest rate.

Negotiations would also continue on the loan's maturity, deputy minister Septian Hario Seto said, adding Indonesia wanted it 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.

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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 3.2 trillion rupiah ($214.77 million) of capital into PT KAI in January to help plug ballooning costs.

The railway is expected to operate commercially by August, Luhut said.

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Editor: Yudho Winarto