Hungary signs $1.9bn loan deal with China for railway to Belgrade

Hungary and China have signed a loan agreement to finance 85% of the cost of building a long-planned railway between Budapest, Hungary’s capital, and the capital of Serbia, Belgrade.

Hungary’s Finance Minister Mihaly Varga announced the deal on Facebook on Friday, 24 April.

At first, Varga did not disclose what the agreed rate of interest was.

But he later told Reuters that the 20-year, $1.9bn loan carried an annual interest rate of 2.5% and an early repayment option.

He also said there was a five-year grace period on the repayment of the principal.

Earlier this month, the Hungarian government drafted legislation to keep all data in contracts for the $2.1bn, taxpayer-funded railway secret for 10 years.

It said the move was necessary to protect Hungary’s foreign policy and economic interests, and to secure the necessary credit from China’s Exim Bank.

"We have a loan agreement that is advantageous and secure for Hungary," Varga said in his Facebook video, said Reuters.

Hungary is to provide the remaining 15% of the cost.

Plans for the railway were first announced in 2014. The aim was eventually to extend the line to the port of Piraeus in Athens, to serve as a conduit for Chinese imports to Europe.

Varga said the new rail link to Belgrade would be finished by 2025.

The 150-km Hungarian stretch will be built by a 50:50 consortium that includes holding company Opus Global – controlled by Lorinc Meszaros, an associate of Prime Minister Viktor Orban – and  the Chinese state railway company, China Railway Group, through its China Tiejiuju Engineering and China Railway Electrification Engineering subsidiaries.

Construction in Serbia ceremonially launched in 2017, after the country borrowed almost $300m from China, and work is expected to be complete in 2022.

Image: Night view of The Széchenyi Chain Bridge from Buda Castle in Budapest, Hungary (Wilfredor/CC0 1.0)

Further reading:

Story for GCR? Get in touch via email: [email protected]

Latest articles in News