The state audit offices of Estonia, Latvia and Lithuania have estimated that an additional €19 billion is needed to complete the Rail Baltica project in full. Taking into account the latest project budgets and already allocated funds, Estonia requires an additional €2.7 billion, Latvia needs €7.6 billion and Lithuania requires €8.7 billion to finish the project.

To cope with the increased budget and the strict deadline of 2030 for the railway's completion, the governments of Estonia, Latvia and Lithuania are preparing to scale back the work to be completed by 2030, focusing on constructing the main railway line. This reduction in the project's scope means that local stops will be built later or with minimal functionality, and some sections of the railway will have only a single track instead of two.

Reducing the originally planned scope of the project is expected to nearly halve the anticipated budget shortfall for the three countries by 2030. Under the first-phase scenario, the estimated shortfall for the three countries combined would be €10.1 billion – €1.8 billion in Estonia, €4.4 billion in Latvia and €3.9 billion in Lithuania.

The state audit offices highlighted the uncertainty surrounding whether, and how much, funding will be allocated to the Rail Baltica project from its main source of funding, the Connecting Europe Facility (CEF), in the next EU funding period starting in 2028, or what the co-financing rate would be.

The timely acquisition of funding is in doubt not only because of the estimated cost increase but also because the current EU funding period ends in 2027. Since the next funding period starts in 2028, there is likely to be a funding gap between 2027 and 2028, as grants are usually not disbursed in the first year of a new multiannual financial framework. Given the project's strict deadline, with railway infrastructure needing to be completed by 2030 and intensive construction planned for 2027-2028, this funding gap will need to be addressed.

Project at least five years behind schedule

The state audit offices noted that even with a reduced scope, the project is at least five years behind the schedule approved in 2017. Construction was supposed to be completed, and the railway operational by the end of 2025. The overall delay is primarily due to successive setbacks in the design and planning processes, which also affect the pace of land acquisition.

According to the responsible ministries, the second phase of the project will begin after the trains start operating and freight volumes increase. However, the timeline for the second phase has not yet been established.

Delays could also lead to the Baltic states missing the deadline for using funds allocated from the Connecting Europe Facility (CEF), resulting in a potential loss of these funds. National implementation agencies and RB Rail AS estimate that Estonia risks losing €8 million, Latvia €4 million and Lithuania €71.5 million if these amounts are not invested within the eligibility period. In Latvia, there is also a risk that funds already spent on design work may need to be returned, as these projects are expected to be completed later than the allowed timeframe.

Several crucial decisions necessary to start train operations on the new railway by 2031 are still pending. The only decision made so far by the three Baltic states regarding infrastructure management is that each country will have a separate, independent management agency. However, Latvia still only has a temporary infrastructure management agency.

According to the joint report, RB Rail, the project's main coordinator, and the national implementing agencies lack a mechanism to encourage responsible ministries to make decisions more quickly. There is no decision defining the roles and responsibilities of the project's stakeholders or the principles for railway management, including how to distribute profits and losses or resolve disputes.

Even if railway completed in time, there may be no trains

If the first phase of the railway construction is completed by 2030, there is a risk that no trains will be available to use on the railway by 2031, according to the state audit offices. Current estimates suggest that procuring trains could take up to eight years. The joint report highlights that the ministries responsible for transportation have not yet decided how to acquire the trains – whether to lease them, purchase them outright or require passenger transport companies to provide their own trains.

Additionally, the cost of procuring trains and the expenses for maintaining and operating the project are not included in the project budget and cannot be funded by the European Union.

The state audit offices of Estonia, Latvia and Lithuania emphasize the need to further develop risk and changes management for the project. This would help swiftly implement corrective measures in complex projects and keep cost increases and contingency reserves under control.

The 2019 joint report found that although risks had been identified, assessed and prioritized, the development of a comprehensive risk management system for the entire project was still incomplete and mechanisms for managing changes at the project level were lacking. The current review indicates that these deficiencies still exist and risk and change management at the project level by RB Rail AS and the national implementing agencies have not significantly improved since 2019.

The Rail Baltica project, an 870-kilometer railway line from Tallinn to the Lithuanian-Polish border, is the largest infrastructure project in the history of the Baltic states since their independence. To date, the primary source of funding for the project has been the European Union's Connecting Europe Facility, with an EU co-financing rate of up to 85 percent.

The beneficiaries of the Rail Baltica project are the ministries of each participating country responsible for implementing the project, and the joint venture RB Rail. The project is executed by three national implementing companies: Rail Baltic Estonia OÜ in Estonia, Eiropas Dzelzceļa Līnijas SIA in Latvia, and LTG Infra in Lithuania.

On December 15, 2023, the state auditors of Estonia, Latvia, and Lithuania signed an agreement to conduct a joint review of the Rail Baltica project. The aim of the review was to gather facts about the progress and funding of key aspects of the Rail Baltica project and to ensure that the parliaments of the countries are aware of the risks associated with the current status of the project and their impact on achieving project objectives.

The top audit institutions of Estonia, Latvia and Lithuania examined the implementation of the Rail Baltica project at both national and international levels. As this was a review and not an audit, the highest audit institutions did not provide recommendations.

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