Sri Lanka request to increase port loan interest raised costs: Harsha

EconomyNext – Former Sri Lankan president Mahinda Rajapaksa had asked China to increase the interest on a loan to build the southern Hambantota port, causing huge losses to the country, Deputy Economic Policy Minister Harsha de Silva said.

The request on the 307 million US dollar loan by Rajapaksa, as finance minister, was made at a time of falling global interest rates and had no logical reason, de Silva told a news conference.

He said Rajapaksa asked China to raise interest to a fixed rate of 6.3 percent from a floating rate of LIBOR (London Interbank Offered Rate) of 0.5 percent at that time plus 90 basis points (0.9 percent) which yielded an effective rate of 1.4 percent

“I have proof. The request was made on 2 October 2008, when LIBOR was falling,” de Silva said, waving a sheaf of papers that he said was correspondence between Rajapaksa and the Chinese ambassador.

“The request to raise the interest was by Mahinda Rajapaksa as finance minister, not the Chinese.”

But de Silva refused to release the correspondence to the media.

Then-Treasury Secretary P B Jayasundera had advised against the move, he said.

Asked why the former regime wanted the interest rate raised, de Silva said: “You have to ask Rajapaksa.

“There was no logical reason from Sri Lanka’s point of view to ask China to increase the interest on the loan,” de Silva said.

He said the new government was trying to renegotiate all the loans from China on a case-by-case basis, to get better terms, with some success.
(Colombo/July 16, 2015)
 

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