By Wu Qiaoxi | 2026-03-03

Indonesia has begun using public funds to service debt tied to its $7.27 billion (about 123 trillion IDR) Chinese-built high-speed railroad, as mounting losses turn what was once a flagship infrastructure project into a growing burden on state finances.

More than two years after commercial operations began in October 2023, the Jakarta–Bandung "Whoosh" line is facing deep financial strain. Construction cost overruns and feeble passenger demand have forced the government to step in.

A Chinese pledge broken

The state's intervention contrasts with China's original pledge that the railroad would proceed without Indonesian government funding or debt guarantees, according to Japan's Jiji Press.

State Secretary Prasetyo Hadi said on February 10 that President Prabowo Subianto plans to allocate about 1.2 trillion IDR ($70.8 million) annually from the national budget to help repay the railroad's debt to China, the Jakarta Globe reported.

The move clarifies weeks of debate over whether the obligation would fall to Indonesia's sovereign wealth fund (Danantara) or to the state.

The project's total cost swelled to roughly $7.27 billion (about 123 trillion IDR), about 20% above initial estimates, following delays and cost overruns. About 75% of the financing came from the China Development Bank.

The bulk of the financing carried an annual interest rate of 2%, while cost overruns have an interest rate of 3.4%, compounding pressure as ridership lagged behind projections. Annual interest payments total about $120 million (about 2 trillion IDR), according to local media -- exceeding the 1.2 trillion IDR ($70.8 million) that the government now plans to contribute each year.

A 'time bomb'

Ridership has fallen far short of expectations. Early feasibility studies projected more than 18 million passengers annually, but the railroad recorded only about 6.2 million passengers last year. Fares that cost more than conventional rail journeys and stations far from city centers have constricted demand.

The operator, Kereta Cepat Indonesia China, is a joint venture 60% owned by Indonesian state enterprises and 40% by a Chinese consortium. The Indonesian consortium posted a net loss of 4.19 trillion IDR ($247.3 million) in 2024, while liabilities soared to 18.9 trillion IDR ($1.1 billion) by mid-2025.

KAI President Director Bobby Rasyidin has called the situation a ticking "time bomb."

Danantara, which oversees state firms including rail operator KAI, has resisted absorbing the full debt burden. So the government will cover infrastructure-related obligations through the national budget, while Danantara manages operational matters. Negotiations with Beijing over restructuring the loans remain under way.

Choosing China over Japan

Jakarta awarded the railroad-building contract to China in 2015 after a fierce contest with Japan. During President Susilo Bambang Yudhoyono's tenure, Japan's Shinkansen system was widely seen as the leading candidate, with the Japan International Cooperation Agency completing a feasibility study in June 2015.

But President Joko "Jokowi" Widodo, who succeeded Yudhoyono, chose the Chinese proposal in September 2015 after an aggressive sales pitch linked to Chinese President Xi Jinping's Belt and Road Initiative. China's bid stood out for asserting that it would need no financial contribution or debt guarantees from Indonesia -- a pledge that has since unraveled.

Officials are considering extending the line eastward to Surabaya in hopes of expanding the passenger base and improving long-term viability. But with the state already allocating its own funds to service debt, the railroad has become a high-profile test of how Indonesia manages large-scale infrastructure projects.

For now, the government faces the immediate task of stabilizing a project, once touted as self-reliant, that now relies on taxpayer support.