Probe on H’tota Port interest rate welcomed

Tuesday, 2 June 2015 00:02 - - {{hitsCtrl.values.hits}}

Policy Planning and Economic Development Deputy Minister Dr. Harsha de Silva yesterday welcomed steps by the Ports Authority to investigate alleged fixing of interest rates of the Hambantota Port loan at higher than market rates by the former Government.
Dr. De Silva recalled that he had long protested the increase of the interest rate on the loan obtained by the Government for the Hambantota Port. He insisted that the international interest rate otherwise known as LIBOR at the time the loan was signed was only 1.25% but as rates plummeted globally the former Government through a Cabinet paper fixed the repayment interest rate at 6.3% resulting in significant losses to the country.
The $ 306 million loan secured in 2008 from China’s Ex-Im Bank to develop the first phase of a port in the southern city of Hambantota, since completed, had been signed at a fixed interest rate of 6.3%. That was despite an option to go for a floating rate of LIBOR plus 90 basis points.
“If we had a floating rate, we would have been paying 1.3% today. But now we are paying 6.3% per annum. I don’t think we should be paying 6.3% on a 15-year loan,” he said.
The Deputy Minister had previously stated the change in interest rates was made on a request by the lender.