Indonesia Plans Debt Restructuring for China Financed Jakarta Bandung High Speed Rail

Why Indonesia is seeking new terms on Whoosh debt

Indonesia is preparing to reopen talks on the debt that funds the Jakarta Bandung high speed rail, a flagship project that has delivered faster travel but is now straining its finances. The train, branded Whoosh, cuts the journey between the capital and West Java to about 45 minutes. Ticket revenue, however, is proving too thin to cover operating costs and service the loans that built the line. Policymakers have asked the country’s new sovereign wealth fund, Danantara, to coordinate a plan that eases the repayment burden and stabilizes the operator’s cash flow.

The 142 kilometer line cost about 7.27 billion dollars and opened to the public in October 2023 after years of delay and a large cost overrun. In 2015, Jakarta chose a partnership with Chinese firms and financing through a policy bank over a rival proposal from Japan. The promise of quicker construction and no sovereign guarantee appealed at the time. A decade later, the project still carries strategic weight in ties with Beijing, yet the math has become more challenging as ridership lags forecasts and interest payments rise.

Signs of stress surfaced publicly when the head of PT Kereta Api Indonesia, the national rail operator and a major shareholder in the project, briefed lawmakers about the risks. Introducing the issue in a parliamentary hearing, the executive used stark language to underscore the urgency of a debt fix.

Before the hearing, PT Kereta Api Indonesia’s president director Bobby Rasyidin was introduced as the executive now leading efforts to stabilize the railway’s finances. He told legislators that the operator must work with the sovereign fund and other stakeholders to defuse the risk.

We are also investigating the Whoosh issue; it’s indeed a ticking time bomb. We will coordinate with Danantara to resolve this issue and then improve and restructure the existing portfolios.

The remarks, delivered on August 20, set the stage for a push to renegotiate loan terms with Chinese creditors and to reshape the project’s capital structure so that day to day operations are not crowded out by debt service.

What Indonesia wants to change

Officials are assessing several levers. The priority is to lower the cost of borrowing on the tranche used to fund the overrun, extend the tenor to reduce annual payments, and possibly secure a longer grace period before principal repayment accelerates. Another strand of work is a broader balance sheet restructuring for the operator that could include fresh equity, a shift of some liabilities to Danantara, or refinancing part of the debt in local currency if terms are competitive. The aim is to buy time for ridership and ancillary revenue to grow without placing an excessive burden on the state budget.

How the project is financed and who bears the risk

The original construction package relied on a large loan from the China Development Bank that covered roughly 75 percent of the initial cost, about 4.5 billion dollars. The remainder came from equity put up by a joint venture known as PT Kereta Cepat Indonesia China, or KCIC. Indonesian partners, grouped under Pilar Sinergi BUMN Indonesia, hold 60 percent of KCIC. Chinese state firms hold 40 percent. Within the Indonesian consortium, PT Kereta Api Indonesia has the largest stake, alongside construction group Wijaya Karya, toll road operator Jasa Marga, and a plantation company.

Delays tied to land acquisition and the pandemic pushed the price up by about 1.2 billion dollars. To cover that gap, the operator drew an additional loan at a higher interest rate. The combination of a bigger principal and pricier interest has left KCIC with a heavier repayment schedule while the service is still maturing. Financial filings and parliamentary testimony show steep losses since operations began. KCIC recorded a loss of around 4.2 trillion rupiah in 2024 and about 1.6 trillion rupiah in the first half of 2025. PT Kereta Api Indonesia absorbed a large share of those losses, which has started to weigh on its otherwise stable core business.

The cost overrun and the pricier loan tranche

The final overrun was settled at roughly 18 trillion rupiah, close to 1.2 billion dollars. The original loan carried an interest rate near 2 percent, in line with policy bank financing for strategic infrastructure. The add on debt that bridged the overrun is closer to 3.4 percent. That gap matters. Even a small reduction on the added tranche could translate into meaningful cash savings each year. Extending maturities would further smooth the path to solvency by aligning repayments with the demand ramp that most new rail links experience in their early years.

Demand, fares and the occupancy gap

Whoosh carried about 2.9 million passengers in the first half of 2025, a double digit increase from the same period a year earlier. Growth is real, yet the base remains short of initial projections. Early planning scenarios envisioned 50,000 to 76,000 passengers a day, depending on pricing and feeder links. Current traffic is well below those figures. This mismatch is central to the debt conversation, because ticket sales are not yet adding up to the level required to shoulder operating and financing costs.

There are several reasons. The corridor is relatively short for a very high speed service. The stations are not all in the historic centers of Jakarta and Bandung, so many trips require a feeder leg to complete the journey. Competing options, including intercity trains, buses and private cars, remain attractive for price sensitive travelers, especially families moving in groups. The first and last mile can be the difference between an easy decision to take the train and sticking with the car.

Policy fixes exist. Deeper integration with Jakarta’s MRT and LRT and with regional commuter rail can shorten transfer times. Timed feeder trains and buses into Bandung’s core, bundled tickets, and promotions during off peak hours can lift the load factor. A more flexible fare strategy, with seats priced to fill trains during quieter periods, is another lever. Improving wayfinding, parking, and ride hailing pickup zones at Halim, Padalarang, and Tegalluar would also make the service more convenient for casual users.

Political and institutional response

Parliament’s Commission VI, which oversees state enterprises and investment, has pressed the operator and the sovereign fund to present a clear plan. Lawmakers have aired options that range from recruiting new equity investors, to moving a portion of the debt to Danantara, to a temporary assumption of liabilities by the state if that proves cheaper than allowing losses to swell. Commission members warned that without swift action, interest costs could weigh on the national rail operator’s broader operations in 2026 and beyond.

What a debt restructuring with China could include

Debt renegotiations can take many forms. Indonesia is likely to seek a lower interest rate on the overrun tranche, a longer maturity profile, and a grace period on principal to reduce near term cash drain. Another avenue is a partial conversion of debt into equity held by public bodies, which would shift fixed interest obligations into a variable claim on future profits. A revenue linked schedule could be considered, where payments step up in tandem with passenger and station income. Officials are also exploring whether Danantara, which has more flexibility than an operating company, can take over certain obligations and refinance them on better terms.

For both sides, preserving a stable partnership is as important as the spreadsheets. The railway is a showpiece of cooperation and a daily service used by millions of Indonesians. A negotiated solution that stabilizes cash flows without surrendering control of assets or loading unpredictable risks onto taxpayers is the target. The odds of some accommodation are helped by the project’s political profile in both capitals.

Beijing’s position and regional precedent

Chinese officials have long argued that cooperation under the Belt and Road framework follows international norms and that claims of debt traps are misplaced. In practice, many borrowers have refinanced or restructured large projects to fit domestic needs, as seen in Southeast Asia where governments trimmed costs or stretched out payments to align with their budgets and traffic realities. Indonesia’s stance has been consistent, keeping control over the asset and avoiding blanket sovereign guarantees while seeking fairer terms where costs exceeded the original plan.

The history of the Jakarta Bandung project reflects that balance. Choosing not to guarantee the original loan preserved fiscal space. The challenge now lies in reconciling a pricier overrun tranche with a usage profile that is still maturing. That is where interest relief, tenor extension, and operational improvements can meet halfway.

Can Whoosh work as a public service

Many successful transport systems around the world do not pay for themselves through fares alone. They are part of a public service mandate that values time savings, safer travel, lower congestion, and cleaner air. Indonesia already supports passenger rail with budgeted subsidies for social service routes. In that context, Whoosh operating losses in the early years are not unusual. The debate is over the best way to support the service while keeping incentives aligned.

Direct fare subsidies would flow to all shareholders, including foreign partners, in proportion to their stakes. That is one reason the government has tended to favor measures like capital injections, station lease waivers, or rolling stock support instead of cutting fares with public money. Land value capture around stations can also play a role, with developers paying for the uplift in property values created by the line. Those proceeds can be reinvested into the network without lowering the price signal that helps manage demand in peak periods.

Capturing value around stations

The biggest financial gains may come from beyond the tracks. Transit oriented development around Halim, Padalarang, and Tegalluar can anchor new housing, offices, and retail that generate stable rents, fees, and one off land payments. Retail concessions in stations, parking income, and advertising contribute smaller but steady streams. Many Asian railways rely on this model to close the gap between fare revenue and capital recovery. Success depends on zoning, land rights, and an ability to move quickly on master plans that fit local needs.

Risks to state owned enterprises and taxpayers

PT Kereta Api Indonesia’s balance sheet gives it room to maneuver, but not unlimited capacity to absorb losses. By 2024 the company reported liabilities of about 3.7 billion dollars, assets of roughly 5.8 billion dollars, and equity north of 2 billion dollars. Repeated losses from the high speed venture would chip away at that buffer. Ring fencing the project’s obligations and using Danantara as the primary debt holder could shield core passenger and freight services that Indonesians rely on daily.

Shifting debt to the sovereign fund would not erase the obligation, it would reassign it within the public sector. The benefit is that an investment holding can tap a wider set of funding sources, bring in strategic partners, and structure repayments with more flexibility than an operating railway. Careful disclosure and independent audits will help maintain market confidence if the state chooses that path.

Extension to Surabaya under review

Leaders in Jakarta continue to explore an eastward extension to Surabaya, the country’s second largest city. The idea is to connect the capital with a much longer corridor that could unlock stronger demand and a bigger economic payoff. Senior officials have said the legal framework for the plan is being prepared. At the same time, they acknowledge that regulatory hurdles and the existing debt burden must be addressed first. The extension will require fresh financing and hard decisions about route, station locations, and the pace of construction.

If the first phase is stabilized through a credible restructuring and better integration with local transport, a longer line could strengthen ridership by drawing more through travelers and freight shifting to fast passenger services for logistics workers. That vision hinges on disciplined procurement and safeguards that prevent the return of cost overruns that weighed down the initial build.

What to watch in the coming months

Several markers will indicate whether the financial risks are easing. Danantara is expected to deliver a restructuring blueprint and to start formal talks with lenders and Chinese partners. Any agreement on interest rates, grace periods, or maturity extensions will be closely watched by markets and by Parliament. Seasonal peaks around holidays will test whether demand can climb toward the levels used in earlier forecasts. Operational tweaks, from better feeder connections to integrated ticketing, can help. Policymakers will also signal how the Surabaya concept fits into a staged plan that prioritizes the health of the first line.

The Bottom Line

• Indonesia will seek to renegotiate debt on the Jakarta Bandung high speed rail as ticket sales alone cannot cover operating and financing costs.
• The 7.27 billion dollar project was funded mostly by a China Development Bank loan, with a pricier add on tranche for cost overruns.
• Ridership is growing but still below early projections, leaving the operator with losses and a heavier repayment schedule.
• PT Kereta Api Indonesia and the sovereign fund Danantara are preparing a restructuring plan that targets lower interest, longer maturities, and stronger equity.
• Lawmakers have urged quick action, warning that interest costs could weigh on the national rail operator’s broader services.
• Chinese officials say Belt and Road cooperation follows international norms, and many large projects in the region have been refinanced or reworked.
• Public transport often requires support beyond fares, making land value capture and station income important for closing the funding gap.
• Moving some obligations to Danantara could shield core operations while keeping the project within the public sector.
• An extension to Surabaya remains on the agenda, but decisions will hinge on stabilizing the first line and securing sustainable financing.
• Key milestones ahead include the terms of any loan adjustments, ridership trends during peak travel periods, and progress on integration with local transport networks.