Project ID: 33369

China Eximbank provides RMB 1.3 billion government concessional loan for the Mattala Rajapaksa International Airport Project

Commitment amount

$ 248090190.7

Constant 2017 USD

Summary

Funding agency [Type]

Export-Import Bank of China [State-owned Policy Bank]

Recipient

Sri Lanka

Sector

Transport and storage (Code: 210)

Flow type

Loan

Concessional

Yes

Category

Intent

Development (The next section lists the possible statuses.)

Commercial

Development

Representational

Mixed

Financial Flow Classification

ODA-like (The next section lists the possible statuses.)

Official Development Assistance

Other Official Flows

Vague (Official Finance)

Flows categorized based on OECD-DAC guidelines

Project lifecycle

Status

Completion (The next section lists the possible statuses.)

Pledge

Commitment

Implementation

Completion

Suspended

Cancelled

Milestones

Commitment year

2009

Completion

2013

2013-03-18

Planned

2013-03-18

Actual

Geography

Description

On December 23, 2009, China Eximbank and the Government of Sri Lanka signed a government concessional loan (GCL) agreement worth RMB 1.3 billion for the Mattala Rajapaksa International Airport Project. The GCL carried the following terms: 2% interest rate, 20-year maturity, 5-year grace period, commitment fee of 0.5%, and management fee of 0.5%. The purpose of the $209 million project was to construct an alternative airport, located in Mattala, to the Bandaranaike international Airport. China Harbour Engineering Company was the contractor responsible for project implementation. The project involved the construction of a 4 km runway, a parking apron, a taxiway connecting the runaway and the apron, a terminal building, cargo storage, a fuel arm, and a fire service building. Construction began on November 17, 2009. The construction of the runway, apron and taxiways was completed ahead of schedule in February 2012. On January 24, 2013, Sri Lanka’s Minister of Civil Aviation Piyankara Jayaratne reported to parliament that the airport would be declared open on March 18, 2013. On October 16, 2012, a Hawker Beechcraft B200 King Air of the Pakistan Civil Aviation Authority became the first aircraft to land at the new airport. The airport was opened for flight operations, as planned, on March 18, 2013. President Rajapaksa, his ministers, and other dignitaries arrived in a SriLankan Airlines Airbus A340 to attend the inauguration ceremony. This project was plagued by cost overruns and controversy. It ultimately cost $243.7 million to implement the project. However, the original budget for the project was $209 million. The Mattala Rajapaksa International Airport is also widely considered to be a commercial failure. The construction of the 12,000 square meter terminal building was originally designed to support as many as one million travelers per year, and the government envisioned major international carriers bringing travelers from Beijing, Chennai, Dubai, Riyadh, and Bangkok to Hambantota for sporting events, international conferences, eco-tourism, and nightlife. However, it was eventually dubbed “the world’s emptiest international airport.” Sri Lanka’s aviation minister reported to parliament in 2014 that the airport had only earned $123 in revenue in a single month, and when a visiting journalist asked a senior government official about the airport, he indicated, “when I visited the airport there, I asked the sole immigration officer how many passports she’d stamped that day. She said, ‘One’.” Within only a few years of becoming fully operational, the airport was running an annual financial loss of $18 million. Consequently, the airport failed to generate sufficient revenue to facilitate loan repayment. in January 2015, Maithripala Sirisena was elected President of Sri Lanka and one of his first orders was to allow SriLankan Airlines to cancel all flights to Mattala Rajapaksa International Airport. The national carrier released a public statement that read: “[T]he reality is Mattala Rajapaksa International Airport is not needed and is a distraction in Sri Lankan’s efforts to turn itself around. … SriLankan Airlines continues to be highly unprofitable and having to meet the political requirement of developing and operating a second hub [in Hambantota district] will make it even harder to meet its targets for financial improvement.”

Additional details

Some reports suggest that the face value of the China Eximbank GCL was $209 million. However, this figure refers to the total cost of the project (prior to cost overruns). In correspondence with AidData’s Executive Director, the Director of the China and AIIB Division with the External Resources Department of Ministry of National Policies and Economic Affairs confirmed that USD loan value of the RMB-denominated China Eximbank loan is approximately $190 million. Note that the Mattala Rajapaksa International Airport is also known as the Mattala Hambantota International Airport Project, Hambantota International Airport, and Southern International Airport).

Number of official sources

13

Number of unofficial sources

20

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Details

Cofinanced

No

Receiving agencies [Type]

Government of Sri Lanka [Government Agency]

Implementing agencies [Type]

China Harbour Engineering Co., Ltd. [State-owned Company]

Loan type

Concessional

Maturity

20 years

Interest rate

2.0%

Grace period

5 years

Management fee

0.5

Commitment fee

0.5

Grant element

53.10116182%

Gurarantee provided

No

Insurance provided

No