China Eximbank provides RMB 508 million government concessional loan for Matara-Beliatta Section of Matara-Kataragama Railway Line Extension Project (Linked to Record ID#33396)

Project narrative

On February 19, 2013, China Eximbank and the Government of Sri Lanka signed a $200 million preferential buyer's credit (PBC) agreement [China Eximbank PBC (2013) 7 TOTAL NO (251)] for the Matara-Beliatta Section of Matara-Kataragama Railway Line Extension Project. The PBC carried the following borrowing terms: a 20 year maturity, a 7 year grace period, a 2% interest rate, a 0.5% commitment fee, and a 0.5% management fee. Then, on May 28, 2013, China Eximbank and the Government of Sri Lanka signed an RMB 508 million government concessional loan (GCL) agreement [China Eximbank GCL (2013) 4 TOTAL NO (449)] for the Matara-Beliatta Section of Matara-Kataragama Railway Line Extension Project. The GCL carried the following borrowing terms: 20 year maturity, 7 year grace period, a 2% interest rate, a 0.25% commitment fee, and a 0.25% management fee. Record ID#33396 captures the PBC, while Record ID#33407 captures the GCL. The China Eximbank PBC disbursed $83,460,000 in 2013, $19,274,611.47 in 2014, $30,639,850.95 in 2015, $14,599,733.52 in 2016, $15,919,125.75 in 2017, $13,362,642 in 2018, $6,853,910 in 2019, $15,890,126 in 2020, and $0 in 2021. The PBC had achieved a 100% disbursement rate ($200,000,000 out of $200,000,000) as of December 31, 2020. The borrower made no repayments on the PBC in 2018, 2019, or 2020. The borrower made repayments on the PBC worth $15,384,614 in 2021. The PBC’s amount outstanding was $163,893,321 as of December 31, 2017, $177,255,964 as of December 31, 2018, $184,109,874 as of December 31, 2019, $192,307,693 as of December 31, 2020, and $176,923,079 as of December 31, 2021. The China Eximbank GCL disbursed RMB 39,290,230.29 in 2014, RMB 83,133,097.15 in 2015, RMB 119,587,111.29 in 2016, RMB 22,708,783.36 in 2017, RMB 65,541,716.19 in 2018, RMB 47,377,642 in 2019, and RMB 118,854,502 in 2020. The loan had achieved a 97.7% disbursement rate (RMB 496,493,082.28 out of RMB 508,000,000) as of December 31, 2020. The borrower made no repayments on the GCL in 2018, 2019, or 2020. The borrower made repayments on the GCL worth RMB 19,538,461 in 2021. The GCL’s amount outstanding was RMB 276,266,140 as of December 31, 2017, RMB 341,807,856 as of December 31, 2018, RMB 389,185,498 as of December 31, 2019, RMB 508,000,000 as of December 31, 2020, RMB 488,461,539 as of December 31, 2021, and RMB 468,923,078 as of June 30, 2022. By early 2022, it was clear that the PBC and the GCL were non-performing. On April 12, 2022, the Government of Sri Lanka announced a ‘pre-emptive’ sovereign debt default, noting that it would suspend debt repayments to all external creditors other than multilateral institutions. Its decision to suspend external debt service reportedly affected all China Eximbank loans with amounts outstanding at the time of the announcement. The purpose of the project, which is formally part of the Belt and Road Initiative (BRI), was to improve transport in the southern region. It involved the construction of 26.75 km length of single line broad gauge rail track from Matara to Beliatta (and a designed speed of 120 kilometers per hour); the construction of structures such as culverts, bridges, viaducts those required over the Nilwala river flood plain, level crossings, underpasses, overpasses, and tunnels; as well as the construction of four numbers railway crossing stations, 2 numbers sub stations and functional requirements of stations. There were three contractors responsible for project implementation: China National Machinery Import and Export Corporation, China Railway No. 5 Engineering Group, and China Railway Electrification Group. A groundbreaking ceremony took place on October 28, 2013. The railway line was completed and opened for use on April 8, 2019.