Cabinet approves fresh loan from China EXIM Bank

Thursday, 9 June 2016 00:00 - - {{hitsCtrl.values.hits}}

Cabinet approval has been given for the Government to enter into a $ 90.5 million loan agreement with China’s EXIM Bank for funding consultancy services, including design renew and construction supervision of the $ 1.7 billion Southern Expressway extension which is also being funded by the same entity.

Under a Cabinet paper submitted by Finance Minister Ravi Karunanayake, the Government will enter into a framework agreement with the Government of China and into a loan agreement with the China Exim Bank for funding “consultancy services for design review and construction supervision of civil works of this project”.

The Sri Lankan Government has already entered into four agreements with China Exim Bank for funding four civil work contracts for the Southern Expressway.

The stretch from Matara-Hambantota was ceremoniously flagged off by President Maithripala Sirisena in July 2015 and China EXIM Bank had already extended a $ 1.7 billion preferential loan with an interest rate of only 2% in 2014 under the previous Government. Repayment is spread over 20 years with a five-year grace period as per the agreement signed in 2014.

Despite its initial anti-China stance, the Government of President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe applied to China for its first preferential loan after winning in 2015, which was also to cover the consultancy funds for the Southern Expressway extension, as exclusively reported by the Daily FT last year.

Consultancy services for design review and construction supervision of civil works on extension of southern expressway project covers the total length of the 96 km road. Section one is from Matara to Beliatta (30 km), section two from Beliatta to Wetiya (26 km), section three is from Wetiya to Andarawewa (15 km) and section four is from Mattala to Hambantota via Andarawewa (25 km).

In addition, 11 regional roads will be rehabilitated with the balance loan amount granted by China Exim Bank for the construction work of section from Pinnaduwa to Godagama of the Southern Expressway. As there is a limited period for the expiry of loan amount and the proposal made by Highways Minister Lakshman Kiriella, to manage required funds for immediate rehabilitation of these roads, was approved by the Cabinet of Ministers.