An Echelon Media Company
Thursday October 6th, 2022

China leads Sri Lanka’s new debt in 2019 with US$990mn expressway loan

ECONOMYNEXT- China led in new loan agreements signed with Sri Lanka for the first 4 months of 2019 with a 989.5 million US dollar loan, while also leading in loans disbursed, the Treasury said.

The government had signed 19 loan agreements worth 2.4 billion US dollars during the four months, which is nine times higher from the 266.2 million US dollars year earlier.

The country also received 8 million US dollars in grants. However, there could be more grants than listed, as the Auditor General had said that state departments independently secure grants without the knowledge of the Treasury, flouting regulations.

The largest loan signed was with China, to construct the Kadawatha-Meerigama section of the Central Expressway.

The 20-year loan has a concessional fixed interest rate of 2.5 percent, with a 6-year grace period.

Chinese loans have been scrutinized internationally amid allegations that they are putting developing countries in debt traps.

Sri Lanka in 2017 signed an agreement to lease the Hambantota Port to China after the debt repayments became too heavy.

The Asian Development Bank (ADB) was the second largest financier signging loan agreements with Sri Lanka for far in 2019 with 310 million US dollars of commitments, of which 300 million US dollars is for the port access elevated highway project.

Landslide mitigation and Colombo urban regeneration projects are set to receive 280 million US dollars from the Asia Infrastructure Investment Bank.

Japan signed a 270.5 million US dollar loan for Colombo’s light rail public transport system, while France partnered for a 85 million US dollar loan for waste disposal system in the
Moratuwa and Ratmalana suburbs south of Colombo.

In total 66.8 percent of the new loan agreements signed were for roads, bridges and ground transport projects, while 11.2 percent was for health and social welfare, and 8.7 percent for housing and urban development.

China also led in terms of financing disbursed to Sri Lanka over the four month period.

Of the 539 million US dollars in loans and grants Sri Lanka received during the period, China provided 213.7 million US dollars (40 percent).

The World Bank provided 14 percent of the total, while the ADB provided 13 percent and Japan 12 percent.

Just over half the funds received were for roads and bridges, and ground transportation, while 15 percent were for water supply and sanitation and 5.5 percent for developing small and medium-sized businesses.

Sri Lanka has 10 billion US dollars in undisbursed loans to be used over the next 5 years, of which a quarter will be from China.

Another 18.7 percent of financing yet to receive is from Japan, with a similar amount from the ADB and 13.5 percent from the World Bank. (Colombo/Jul01/2019)


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