Economists are scrutinizing the role of Danantara after the Presidential Palace announced that the debt for the Whoosh high-speed railway would be covered by the state budget (APBN). The Finance Minister, however, stated that the APBN’s share of the payment would only be 50% and confirmed he had not yet been invited by the Palace for more detailed discussions.
Economists Anthony Budiawan and Mohammad Faisal are in agreement: while using the state budget to settle the high-speed rail debt will undoubtedly “burden” the Anggaran Pendapatan dan Belanja Negara (APBN), it has become a necessary step. This decision comes as interest arrears on the loan are already overdue, and PT Kereta Cepat Indonesia-China (PT KCIC), the consortium behind the project, continues to operate at a loss.
Currently, the Indonesian parties within the consortium bear an annual interest burden of approximately Rp1.2 trillion. This figure does not even include the principal debt, which amounts to hundreds of trillions of rupiah and is slated for repayment starting in 2027. Given these substantial figures, economists warn that covering this debt will exacerbate the existing APBN deficit, where state expenditure already surpasses its revenue.
The situation has led several economists to publicly question the fundamental function of Danantara. According to economist Andri Perdana, Danantara, as an investment management body responsible for overseeing profits from State-Owned Enterprises (BUMNs), should logically be the entity responsible for settling this debt. “We are only getting the rotten fruit from Danantara, not enjoying its benefits,” he remarked, highlighting a perceived imbalance.
Despite the Palace’s definitive assurance that the high-speed rail debt would be paid using the state budget, Finance Minister Purbaya Yudhi Sadewa admitted that further detailed discussions on the debt resolution had not yet taken place. He recalled previous discussions operating on a 50:50 split, implying that the APBN would not shoulder the entire debt burden.
‘Promoting moral hazard’
On Tuesday, February 10, State Secretary Minister Prasetyo Hadi confirmed that the payment of the high-speed rail debt would indeed utilize the APBN. This announcement was met with widespread public disappointment and criticism directed at the government, which had previously pledged not to use state funds for this controversial mega-project.
Mohammad Faisal, Executive Director of CORE Indonesia, described the high-speed rail project, with its debt now borne by the state, as an “unfavorable precedent” for future projects. Speaking to BBC News Indonesia on Wednesday, February 11, Faisal emphasized, “This must truly serve as a critical point of record for government improvement.” He cautioned against the government repeating the same mistakes, particularly given plans to extend the high-speed rail line to Surabaya.
Similarly, Media Wahyudi Askar, Public Policy Director at Celios, argued that the high-speed rail project “has already encouraged a practice of moral hazard” by transferring significant project risks onto the public. “Meanwhile, the public does not receive benefits commensurate with the costs they must bear,” Media stated. He deemed this “unfair,” as the budgetary accountability ultimately burdens future generations, “even 100 years from now.” Media expressed concern that a continuation of similar projects would lead to an proliferation of “slipshod projects undertaken by the government,” with authorities later defending failures by claiming the projects were built for the community.
Indeed, many observers believe the high-speed rail project was flawed from its very inception, exacerbated by allegations of corruption during its implementation. To date, the Corruption Eradication Commission (KPK) has not named any suspects in the alleged corruption surrounding the Whoosh project. In November 2025, the KPK affirmed its ongoing investigation into land procurement, specifically instances where state-owned land was allegedly resold by corrupt individuals for the mega-project.
Given the project’s perceived problematic nature, Anthony Budiawan, Managing Director of Political Economy and Policy Studies (PEPS), urged a thorough investigation into all irregularities and called on the government to “open PT KCIC’s financial reports” for public scrutiny.
Initially, the high-speed rail project’s debt was not classified as state debt, as the project was conceived as a business-to-business (B2B) venture between PT Kereta Cepat Indonesia-China (PT KCIC) and the China Development Bank, a state-owned bank of China. PT KCIC itself is a joint venture between Indonesia, represented by PT Pilar Sinergi BUMN Indonesia (PSBI), and China, represented by PT Beijing Yawan. PT PSBI was specifically established for the high-speed rail project, comprising PT KAI (the largest shareholder), PT Wijaya Karya (WIKA), PT Jasa Marga, and PT Perkebunan Nusantara VIII. This structure implied that the debt should be the responsibility of, and paid by, PT KCIC, not the Indonesian state.
This was precisely why, last year, the Finance Minister rejected the proposal by Badan Pengelola Investasi Daya Anagata Nusantara (BPI Danantara) to use the APBN for resolving the high-speed rail debt. He insisted that the debt should be Danantara’s responsibility, as the investment holding company for State-Owned Enterprises (BUMN). The government had initially remained steadfast in its commitment to find a debt repayment scheme that avoided using the APBN. However, in November 2024, President Prabowo affirmed that “the state will be responsible” and urged PT KAI and the public not to worry. “In essence, there’s no problem, because we will pay possibly Rp1.2 trillion per year,” Prabowo stated during his visit to inaugurate the new Tanah Abang Station in Gambir, Jakarta, on Tuesday, November 4. At that time, Prabowo did not specify the APBN as the source of payment, instead claiming the funds would come from recovered corruption assets, which he said should be used for public welfare. Several parties, including some economists, speculated that this statement was intended to “appease” the Chinese side. Yet, just a few months later, the high-speed rail debt was indeed confirmed to be state-borne and would be paid using the APBN.
Danantara’s role questioned
As the state confirmed that the high-speed rail interest debt would be paid via the APBN, economists immediately focused their scrutiny on Danantara’s function, echoing earlier concerns raised by Minister Purbaya. “We are only getting the short end of the stick from Danantara. Danantara has taken dividends, but it does not contribute to paying the debts of its subsidiaries,” Andri Perdana, Research Director at Bright Institute, told BBC News Indonesia on Wednesday, February 11.
Dividends, as explained, are a company’s net profits distributed to shareholders – in this case, the Indonesian government – as a return for the capital provided by the state. Andri elaborated that before Danantara’s establishment, these dividends were directly remitted to the APBN as non-tax state revenue (PNPB). In 2024 alone, the total dividends from BUMNs reached an impressive Rp85.5 trillion.
Now, these tens of trillions of rupiah are under Danantara’s management, allocated for capital injections, project expansions, and the restructuring of problematic BUMNs, among other uses. Andri questioned the whereabouts of these tens of trillions if Danantara ultimately does not cover the high-speed rail interest, which is routinely paid annually. “Danantara is not audited by the BPK [Financial Audit Agency]. So, we do not know how much cash it possesses, or how capable it is [of paying the debt],” he stated. “Where exactly does the money go that it cannot support PT KAI?” Andri pressed. BBC News Indonesia attempted to contact Danantara for a response, but a media liaison indicated that interviewing CEO BPI Danantara, Rosan Roeslani, was “not yet possible” due to scheduling constraints.
How much will Whoosh debt affect the APBN?
The government has yet to elaborate on the specific mechanism for utilizing the APBN to settle the high-speed rail debt. Currently, the debt resolution process remains in negotiation between the Indonesian government, represented by Rosan Roeslani, and the Chinese side. What is certain is that Indonesia has already commenced paying approximately Rp1.2 trillion annually in interest since the high-speed rail began operation in 2023. The principal debt, amounting to hundreds of trillions, is scheduled to begin repayment in 2027, a decade after the loan agreement was signed.
When questioned by journalists, Minister Purbaya reiterated that he had not been summoned by the Palace regarding the APBN’s use for high-speed rail debt payments. According to Purbaya, the last discussions on PT KCIC’s financial restructuring still revolved around a 50:50 scheme, meaning only half would be borne by the APBN. Should the APBN be used to pay the high-speed rail debt, economists suggest that the most probable mechanism would involve providing State Capital Injection (PMN) to PT KAI, which is the largest shareholder in the PT KCIC consortium.
However, Anthony Budiawan, Managing Director of Political Economy and Policy Studies (PEPS), highlighted that the APBN’s current position is “already weak.” State revenue from tax collection has declined, while, as Anthony noted, government expenditures are substantial and difficult to reduce, especially with large-scale programs like the free nutritious meals initiative. The APBN deficit is also nearing the safe limit of 3% of GDP, implying that the government has very little additional fiscal space for state spending on items such as civil servant salaries, transfers to regions, and subsidies. Economists interpret this as a shrinking fiscal capacity, making it challenging for the government to maneuver its budget during economic shocks or when faced with additional spending needs.
Technically, paying the Whoosh debt through PMN does not directly inflate the APBN deficit, as it is recorded as financing or investment, rather than expenditure. This is because the deficit is calculated solely as spending minus revenue. For the current fiscal year, the Rp1.2 trillion in high-speed rail interest may not seem overly significant for the APBN. Nevertheless, given the prevailing condition of the state budget, this decision is still viewed as narrowing future fiscal space and potentially reducing state cash reserves, which could ultimately impact other critical budget allocations.
“Ultimately, regional transfers (TKD) are the most likely to be cut again by Mr. Purbaya because cash is limited for central government programs—such as paying board of peace contributions,” Andri Perdana, Research Director at Bright Institute, told BBC News Indonesia on Wednesday, February 11. He explained that when state cash decreases, the government typically issues more debt papers to maintain its cash balance. This action would, in turn, increase the government’s interest payment burden. In subsequent years, the government might be compelled to implement efficiencies or reduce the budgets of other programs. Anthony Budiawan suggested that productive spending, including subsidies, would likely be among the first to be curtailed. “These sudden liabilities will affect the government’s ability to alleviate or assist the poor,” Anthony concluded. Given that the project is not yet financially profitable and remains far from its profitability targets, Media Wahyudi Askar warned that using the APBN to pay the high-speed rail debt would become a permanent burden on the national budget.
Summary
The Presidential Palace has confirmed that the Whoosh high-speed railway’s debt will be covered by Indonesia’s state budget (APBN), a decision economists like Anthony Budiawan and Mohammad Faisal view as a necessary burden given overdue loan interest and PT KCIC’s operational losses. The Indonesian consortium faces an annual interest payment of approximately Rp1.2 trillion, with principal debt repayment starting in 2027, which is expected to exacerbate the already strained APBN deficit. Finance Minister Purbaya Yudhi Sadewa, however, noted that previous discussions implied the APBN would only cover 50% of the debt and that he hadn’t been involved in detailed discussions.
This development has led economists to question the role of Danantara, an investment management body for State-Owned Enterprises (BUMNs), asking why it is not settling the debt despite managing significant BUMN dividends. Critics, including Mohammad Faisal, warn that using the APBN creates an “unfavorable precedent” and “moral hazard” by shifting project risks to the public and future generations without commensurate benefits. Economists predict this will reduce fiscal space and may lead to cuts in other crucial programs or increased government debt, making the high-speed rail debt a permanent burden given the project’s current lack of profitability.