Sri Lanka govt to service Hambantota loans; budget cash from asset sale
ECONOMYNEXT – Sri Lanka is expecting to raise a $1 billion upfront from the sale of an 80 percent stake in the Southern Hambantota port to China, but the underlying loans will continue to be serviced by the country, an official said.
The deal is likely to be closed in the first half of next year, Central Bank Governor Indrajit Coomaraswamy said.
The billion dollars would be non-tax revenue for the 2017 budget.
While the government will get the cash upfront, underlying loans taken to develop the port are expected to be serviced by Sri Lanka in the years ahead, he said.
Exim Bank of China was a key financier of the project. The Hambantota port was built with amortising loans.
Details on the deal are sketchy, but Prime Minister Ranil Wickremesinghe has said an 80 percent stake in the port will be sold to China for $1 billion.
Sri Lanka has taken about $600 million for the first phase of the port and more were contracted for the second phase, according to published reports, although what was drawn down is not clear.
The loan appeared to be a government-to-government deal that the Sri Lanka Ports Authority, which was originally expected to run the port, was to repay, officials said.
However, the SLPA was not able to generate revenue from the port.
Government-owned ports are usually ‘privatised’ with the owning company such as a ports agency, giving concessions for several decades for private parties to use the space in the port to run container terminals, shipyards, bunkering services, bagging plants or other services.
The ports agency as the ‘landlord’ will get rents or fees and will continue to own the infrastructure such as breakwater and the port itself. It is not clear what model is being followed with the Hambantota port. (Colombo/Nov03/2016)