ALMATY -- The Kazakh government has decided to forgo financing options from China to fund the much-anticipated light rail transit (LRT) programme in Nur-Sultan after debt repayments to Beijing were seen as too onerous to continue.
Details about the major financial move came to light on November 8.
The Kazakh government in 2015 made a deal with the China Development Bank (CDB) to finance and carry out a light rail transit (LRT) project in Nur-Sultan.
The project was welcomed by locals, many of whom spend several hours a day in traffic jams or waiting for buses, especially in the winter, when the temperature plunges below -20 degrees Celsius.
When the project was originally put out for bids, Chinese firms joined Spanish, French and Turkish companies in seeking to win the LRT construction award as contractors. A Chinese company eventually was selected, news site Tengrinews.kz reported in May 2018.
With an estimated cost of almost $2 billion, the project originally sought a route spanning several districts of the city with 18 stops and underground and above-ground crossings.
Construction was scheduled to be completed in December 2019, but in April this year, Bakhyt Sultanov, the then-mayor of Nur-Sultan, announced that construction was being suspended after the CDB and the city administration failed to reach an agreement on the terms of the next loan tranche.
Ambitions shrunk as financial difficulties grew. The revised project now calls for 11 stops instead of 18, among other cost-saving changes.
In September, it repaid the CDB $343 million (133 billion KZT), paying off the loan early and in full along with accrued interest, according to a report by business news site Inbusiness.kz, citing Nur-Sultan transportation authorities.
To cover the debt, the project operator, Astana LRT, raised $420 million (162 billion KZT) through a bond issue.
Workers had already erected structural columns.
'Significantly lessen the financial strain'
Elvira Jurgenbayeva, the spokeswoman for the Nur-Sultan mayor, said in April that the two sides were "arranging the next tranches of financing" from the Chinese to "clarify mutual requirements."
Jurgenbayeva added that "with the aim of reducing pressure on the project and easing the terms of the financing, the akimat [city administration] and the government are together examining options for completing the project in the future using domestic sources [of financing] in the national currency."
Ultimately, in May, Kazakhstan's State Commission on the Issues of Modernisation of the Economy decided to have the project refinanced and Astana LRT completed a $1.5 billion bond issue that was backed by a government guarantee.
"The rejection of the China Development Bank's loan in favour of the bond issue . . . will make it possible to significantly lessen the financial strain on the country's budget," Inbusiness.kz wrote in a column.
The current mayor of Nur-Sultan, Altai Kulginov, on October 8, acknowledged to reporters that the terms of the international commitments -- meaning commitments to China -- prevented an easy halt to the LRT project.
"The consequences of halting [the LRT project] will be much more serious when it comes to financial commitments. We therefore went for optimisation and declined the Chinese loan," he said.
"In the end, servicing it would mean that we would have handed over more than 800 million KZT ($2.1 million) on top of the sum, so we declined it," he added.
Dosym Satpayev, the Almaty-based director of Kazakh think tank Risk Assessment Group, said that China is motivated by its own interests and is not taking Kazakhstan's interests into account when it comes to providing funding for infrastructure projects.
"Beijing will enact a harsh policy if Kazakhstan's actions run counter to China’s interests," Satpayev said.