China Eximbank provides $1.875 billion preferential buyer’s credit for Budapest–Kunszentmiklós-Tass-Kelebia Section of Hungarian-Serbian Railway Modernization and Reconstruction Project (Linked to Record ID#67020 and #67021)

Project narrative

On November 24, 2015, in Suzhou, the Chinese Government, the Government of Serbia, and the Government of Hungary signed an intergovernmental agreement (MOU) on the modernization and reconstruction of the Belgrade-Budapest railway line. Under the terms of the agreement, the Chinese Government agreed to issue a loan that would cover 85 percent of the costs of modernizing the section of the line between Soroksár, on the outskirts of Budapest, and Kelebia, on the border with Serbia. Péter Szijjártó, Hungary’s Minister of Foreign Affairs, said that the agreement was 'the first concrete success' of the partnership between China and CSE countries. Then, in 2016, the Chinese Government and the Government of Hungary signed a treaty on the development, construction and financing of the Hungarian section of the Budapest-Belgrade railway line. Then, on April 24, 2020, China Eximbank and the Government of Hungary signed a $1.875 billion preferential buyer’s credit (PBC) agreement for the Budapest–Kunszentmiklós-Tass-Kelebia Section of the Hungarian-Serbian Railway Modernization and Reconstruction Project. The PBC reportedly carries the following borrowing terms: a 20 year maturity, a 5 year grace period, and a 2.5% interest rate. The borrower is expected to the use the proceeds of the PBC to finance 85% of the cost of a commercial contract between the Government of Hungary and the CRE Consortium (also known as Kínai-Magyar Vasúti NZrt. or Kínai-Magyar Vasúti Nonprofit Zártkörűen Működő Részvénytársaságnak), which is a joint venture of RM International (50% equity stake) and a Chinese consortium (with a 50% equity stake) consisting of China Tiejiuju Engineering & Construction and China Railway Electrification Engineering Group (Hungary). The commercial contract was issued on May 24, 2019. The first China Eximbank loan disbursement for the Budapest–Kunszentmiklós-Tass-Kelebia Section of the Hungarian-Serbian Railway Modernization and Reconstruction Project took place on June 30, 2022. By July 22, 2024, the China Eximbank loan had achieved a 48.9% disbursement rate ($917,064,286 out of $1,875,000,000). The loan's principal amount outstanding was $1,258,345,528.71 as of March 31, 2025. The purpose of the project is to modernize, rehabilitate, double-track, and electrify the 166 km Budapest–Kunszentmiklós-Tass-Kelebia railway line, thereby avoiding the densely populated and economically important cities of Kecskemét and Szeged. The engineered (design) speed of the high-speed railway is 200 km per hour. Upon completion of the project, it is expected that Hungary will become center of a European logistics network for the transportation of Chinese goods from the CDB-financed Port of Piraeus in Greece to Western Europe. Kínai-Magyar Vasúti NZrt is the general EPC contractor responsible for project implementation. Huawei, V-Híd and Vasútvill are also subcontractors on the project. The EPC contract officially went into effect on May 16, 2020, which marked the beginning of project implementation. Then, on October 15, 2021, a formal groundbreaking ceremony took place. However, the project has experienced major delays and become a major source of local and regional controversy (due to accusations of corruption, artificially inflated project costs, and poor value-for-money). The Hungarian legislature passed a bill on April 19, 2020, stipulating that the Government of Hungary shall not disclose the details of the loan agreement signed by the Government of Hungary and China Eximbank for the next 10 years, because the disclosure of such details would present risks to Hungary's foreign policy and commercial interests.” The loan agreement also become a major source of parliamentary scrutiny and debate in mid-2020. Right-wing opposition Jobbik MP Dániel Z. Kárpát, called on the government to remove the project from its agenda and to redirect funds to the fight against COVID-19. Another member of parliament (MP), János Stummer, demanded answers about the reason for making the details of the loan agreement confidential. He asked if “[t]he time has now come to sweep these buddies’ mega-business under the rug?” This was a clear reference to the fact that billionaire Lőrinc Mészáros, a childhood friend and close ally of the Hungarian Prime Minister Victor Orbán, stands to benefit from the project (through his ownership of Opus Global, which controls RM International). Independent MP Bernadett Szél echoed this point, noting that a loan agreement is “[kept] secret when a lot can be stolen.” Bernadett Szél argued that there are no economic, transport, or climate protection reasons for this “purely political project.” According to centrist green LMP’s MP László Lóránt Keresztes, the Government of Hungary made the loan agreement confidential because there are no real justification for the project. He demanded a detailed budget to find out why each kilometer of the railway line would cost approximately 5 billion forints (EUR 14.2 million). László Szakács of the Socialists (MSZP), objected that only [Orbán-ally billionaire] Lőrinc Mészáros could make an offer and that he would be the one “to spend money coming in from the Chinese loan.” He also argued that “Hungarians [would] only have access to one thing from this project: the repayment of the loan.” Liberal green Párbeszéd MP Bence Tordai questioned the project’s viability and argued that this section of railway line could be bypassed on water with only a small time loss. Gábor Bányai, a member of the ruling party, countered the opposition’s claims that the project would be a betrayal of the national interest. He argued that the project would improved Hungarian transport and create benefits for all citizens. Regarding the rapidly increasing cost of the project, he argued that there is more than a two and a half times price difference between the construction of a railway line that has a speed of 120 km/h versus a railway line that has a speed of 160 km/h. On the nearly doubled price of the project, he said that prices had gone up in the past few years everywhere. State Secretary Tamás Schanda argued that the Chinese loan was more favorable than the other ones on the market. On the involvement of Lőrinc Mészáros’ company in the railway’s construction, State Secretary Tamás Schanda said a bidding process had been opened, everyone had had the possibility to compete, and Hungarians should be proud that a local company won the bid.