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Thursday April 18th, 2024

Leasing “white elephant” Hambantota Port helped ease debt burden: Ranil

ECONOMYNEXT – By leasing the “white elephant” Hambantota Port to China, the Yahapalana Government was able to free the people of Sri Lanka from the burden of debt owed to China, a burden too heavy for them to bear, Former Prime Minister Ranil Wickremesinghe said.

“Ships didn’t call at the Hambantota port. Investments for factories that were anticipated to flow into Hambantota did not arrive. We did not have an income from the port to pay installments and the interest due and could not expect to make a profit from the port for at least 30-40 years,” Wickramasinghe told the privately owned Sirasa TV yesterday.

The former premier defended the lease, arguing that it wasn’t an outright sale the way the Colombo Port City area and the plot of land that Shangri-la Hotel is built on were sold in a total transfer of their ownership.

“I did not opt for such a sale, but we needed to commercialise the Hambantota  port let in foreign investment,” he added.

The USD 1.3 bn Hambantota Magampura Mahinda Rajapaksa Harbour was opened initially in 2010 using debt from China, 85% of which was funded through the EXIM Bank of China.

In 2016, the Sri Lankan government struck a deal to sell an 80% stake in the port to the state-controlled China Merchants Port Holdings. But that agreement sparked protests from unions and opposition groups, forcing the government to renegotiate it.

Under the new plan, the Chinese company was given a 70% stake in a joint venture with the Sri Lanka Ports Authority.

Wickremesinghe said Sri Lanka can manage with just the Colombo harbour for the goods required for the country and since 75% of the work at Colombo harbour is used especially for transshipments sent to India.

“Those days they said that ships will come to the Hambantota port for refuelling but no such ship arrived. For example, just because you buy land along Galle Road and open a fuel station that does not mean every vehicle will come there to refuel. This was actually a white elephant,” he said.

The former PM said that he told the Chinese government that Sri Lanka could not repay the debt.

“Then the Chinese government asked if we were selling it, and if the first opportunity would be given to a Chinese company. There was no other company willing to buy the port as most of them didn’t know what to do with it. China came forward to purchase the harbour because they had a plan for it,” he said.

The Chinese government intended to bring their factories and to send those goods through the Hambantota port and make it an economic hub, said Wickremesinghe, adding that they already had a general plan to open several harbours and industrial zones in the Indian ocean and make  Hambantota the main harbour by including it in that plan.

“But we knew and they knew – and indeed everyone else knew – that they would not be able to make any profit from that harbour for at least 30 years,” he said.

Eventually, he further said, a Chinese state owned company asked for the harbour for 99 years, so the Sri Lankan government agreed to it since it would take 30 years to make profits out of it.

“But we could take it back even in the first year even though we had leased it for 99 years if we paid them the compensation,” he added. (Colombo/Jul30/2020)

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Sri Lanka’s discussions with bondholders constructive: State finance minister

ECONOMYNEXT – Sri Lankan authorities continue to engage all debt restructuring negotiations in good faith, within principles of equitable treatment among creditors, and with maximum transparency within the norms of such negotiations, State Minister of Finance, Shehan Semasinghe has said.

“It is standard practice, when a representative group of bondholders is formed, to entertain confidential discussions with such group and its appointed advisors. In the case of Sri Lanka, the Ad Hoc Group of Bondholders represents holders controlling more than 50% of the bonds, which make them a privileged interlocutor for Sri Lanka,” Semasinghe said on X (twitter).

“It is well understood that given the price sensitive nature of the negotiations, and according to market regulations, discussions with the Group and its advisors are to be conducted under non-disclosure agreements. This evidently restricts the ability of the Government to unilaterally report about the substance of the discussions.

“The cleansing statement, which was issued on the 16th of April, at the conclusion of this first round of confidential discussions with members of the Group, aims at informing the Sri Lankan people, market participants and other stakeholders to this debt restructuring exercise, about the progress in negotiations. It provides the highest possible level of transparency within the internationally accepted practices in such circumstances.

“As informed in this statement, confidential discussions held in recent weeks with bondholders’ representatives proved constructive, building on the restructuring proposals presented by both parties. During the talks both sides successfully bridged a number of technical issues enabling important progress to be made. Sri Lanka articulated key remaining concerns that need to be addressed in a satisfactory manner.

“The next steps would entail further consultation with the IMF staff regarding assessments of the compatibility of the latest proposals with program parameters. Following these consultations, we hope to continue discussions with the bondholders with a view to reaching common ground ahead of the IMF board consideration of the second review of Sri Lanka’s EFF program.”

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Sri Lanka rupee weakens at 301.00/302.05 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 301.00/302.05 to the US dollar in the spot forex market on Tuesday, from 299.00/10 on Tuesday, dealers said. Bond yields were broadly steady.

A bond maturing on 15.12.2026 closed stable at 11.30/35 percent.

A bond maturing on 15.09.2027 closed at 11.90/12.05 percent up from 11.95/12.00 percent.

A bond maturing on 15.12.2028 closed at 12.10/20 percent down from 12.10/15 percent.

A bond maturing on 15.07.2029 closed at 12.25/40 percent.

A bond maturing on 15.03.2031 closed at 12.30/50 percent. (Colombo/Apr17/2024)

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Sri Lanka Treasury Bill yields down across maturities

ECONOMYNEXT – Sri Lanka’s Treasuries yields were down across maturities at Wednesday’s auction with the 3-month yield moving down 7 basis points to 10.03 percent, data from the state debt office showed.

The debt office sold all 30 billion rupees of 3-month bills offered.

The 6-month yield fell 5 basis points to 10.22 percent, with 25 billion rupees of bills offered and 29.98 billion rupees sold.

The 12-month yield dropped 4 basis points to 10.23 percent with 18.01 billion rupees of bills sold after offering 23 billion rupees. (Colombo/Apr17/2024)

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