A planned light railway system that was the most high-profile project in Kazakhstan of China’s Belt and Road infrastructure program has hit a wall.

A series of concrete columns snaking through the capital, Nur-Sultan, are the only visible evidence marking the route of the $1.9 billion railway project that was supposed to start operating in 2020.

China Development Bank halted lending last year after the collapse of the bank where funds it had provided were deposited. Kazakh officials now say they will have to borrow domestically to complete the work.

Central Asia’s largest energy producer is a key element in Chinese President Xi Jinping’s “project of the century” to revive ancient Silk Road trading routes with massive infrastructure projects connecting China with Europe and Africa.

Kazakhstan turned to China for billions of dollars in investments to help reboot an economy that grew just over 1 percent in 2015 and 2016, its slowest since 1998, after oil prices slumped, rocking the nation’s banking sector.

China hasn’t said why it stopped funding the project. Calls to China Development Bank’s press service went unanswered.

‘One Factor’

“One factor” in China’s decision to halt lending is that $258 million of the $313 million it had provided hasn’t been spent on the project, the Nur-Sultan mayor’s office said in an emailed response to questions.

China Development Bank had lent the money to Kazakhstan’s state-owned TOO Astana LRT, which hired a consortium of Chinese companies to carry out construction on the light-rail network.

The Kazakh capital, previously known as Astana, was renamed after leader-for-life Nursultan Nazarbayev in March.

Astana LRT deposited the funds in Bank of Astana but didn’t disburse them. Less than a month before the central bank revoked Bank of Astana’s license in September 2018, the liability for the deposit was transferred to the Finance Ministry’s Problem Loan Fund. China Development Bank stopped financing the project in October.

Kazakhstan has pledged to repay China Development Bank in line with the loan agreement, according to the mayor’s office. So far, the Problem Loan Fund has released 3.3 billion tenge ($8.6 million) to Astana LRT to pay the contractors in February, it said.

White Elephant

“From the very beginning, many observers have been questioning the project’s valuation,” said George Voloshin, a Paris-based analyst for Aperio Intelligence Limited. “I am sure that many financial analysts would be surprised, if they had that level of access, at the figures at which Astana LRT had been initially assessed, both in terms of how much it would cost to build the infrastructure and how quickly the loan could be paid back.”

Kazakhstan is working on restructuring the Chinese loan, which is protected by a state guarantee, Ruslan Meirkhanov, head of the Finance Ministry’s state borrowing department, said in an interview. The mayor’s office, not the ministry, will be responsible for completion of the railway project, and will raise funding in tenge to reduce currency risks, he said.

There’s also the question of whether the population of the capital needs the project, according to Voloshin. “Astana LRT is probably that white elephant, that is, something that costs much and presents little relevance for the population of Nur-Sultan,” he said.