The government plans to use Japan's loan pledge to Indonesia this year for a number of infrastructure projects in the power and transportation sectors, including an �85 billion (some US$700 million) subway project in Jakarta.

The Ministry of Finance's director general of the treasury, Mulia P. Nasution, said that loans for three projects, including power plant and subway projects, would carry the new, higher interest rate of 1.5 percent. He did not specified what the other project was.

"There are several projects currently being discussed, and the new interest rate will affect three of them," Mulia told reporters on Friday.

"The (three) projects include the construction of a mass rapid transportation (MRT) system and power plants, among other things."

He said he could not elaborate on the details or value of the projects pending final discussions with the Japanese government.

Separately, Japanese Ambassador to Indonesia Yutaka Iimura said that among the projects was the construction of a subway line from Lebak Bulus, South Jakarta to Kota, West Jakarta, with Japan contributing technology and 85 percent of the costs through an �85 billion loan with a 40-year repayment period and a 10-year grace period.

Japan plans to finance a total of nine projects in the infrastructure, human resources development and poverty reduction sectors as part of its loan pledge worth some US$1 billion to Indonesia this year. It will also speed up the disbursement of $420 million from previous unused loan commitments.

Japan will, however, apply a new interest rate of 1.5 percent to its new loans to Indonesia this year, up from 1.3 percent previously, based on the consideration that Indonesia's per capita gross domestic product (GDP) has risen sufficiently to place the country in the lower-to-middle-income bracket.

But to avoid any additional financial burden for Indonesia, only three projects will carry the new interest rate, with the others being preferential projects carrying a lower 0.75 percent interest rate. All the projects will also retain concessional terms such as 30-year repayment periods, 10-year grace periods and no commitment fees.

Mulia, however, said that the government was still in negotiation with its Japanese counterpart in order to persuade the latter to cancel the plan to apply the higher interest rate.

He added that the government of Indonesia was also seeking a lower domestic financing requirement of 15 percent rather than the 25 percent of the total cost needed for each Japanese-sponsored project.

The government hopes to raise Rp 35.11 trillion in foreign loans so as to, among other things, help finance this year's budget deficit, which is expected to come in at Rp 22.4 trillion, or 0.7 percent of GDP.

Last year, Japan committed �114.83 billion through the CGI to help finance eight major infrastructure projects.

Meanwhile, on the government's debt swap agreement plans with donor countries, including with Japan, Mulia said the details were still being discussed. State Minister for National Development Planning Paskah Suzetta had said that Indonesia was seeking debt swap agreements with Italy, Germany and the United Kingdom.