Narrative
Full Description
Project narrative
On March 31, 2011, China Development Bank and the Government of Sri Lanka signed a $500 million loan facility agreement (No. 4500062212011110472) for the Rehabilitation and Improvement of Priority Road Project 2 (PRP2). This loan carries the following borrowing terms: a 15 year maturity, a 4 year grace period, an interest rate of 6-month LIBOR pus a 2.9% margin, a 0.5% management fee, and a 3.26% Sinosure insurance (risk) premium. The loan was reportedly collateralized against cash deposits in escrow account. The first tranche (worth $326 million) was received by the Central Bank of Sri Lanka on June 29, 2011 and second tranche (worth $174 million) was on October 28, 2011. $157 million was disbursed in 2011 and 2012, $118.52 million was disbursed in 2013, $161.01 was disbursed in 2014, $51.37 was disbursed in 2016, and $7.38 million was disbursed in 2016. The loan had achieved an 99.5% disbursement rate ($497.56 million out of $500 million) as of December 31, 2016. $2,435,206.99 was disbursed in 2017, bringing the loan disbursement rate to 99.99% ($499,995,206.99). The borrower made repayments worth $38,460,000 in 2018, $38,460,000 in 2019, $38,460,000 in 2020 and $38,460,000 in 2021. The loan's amount outstanding was $346,160,000 as of December 31, 2017, $307,700,000 as of December 31, 2018, $269,240,000 as of December 31, 2019, $230,780,000 as of December 31, 2020, $192,320,000 as of December 31, 2021, and $173,090,000 as of June 30, 2022. By early 2022, it was clear that the loan was 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 Development Bank loans with amounts outstanding at the time of the announcement. By March 2023, the Government of Sri Lanka had accumulated $338 million in arrears to China Development Bank. The total cost of the PRP2 was $556 million. 90% of the project cost was covered by CDB and approximately 10% of the project cost was provided by the Government of Sri Lanka. The purpose of the project to rehabilitate and improve 581 km in 20 roads, including 95 km of provincial roads in Nuwara Eliya district, construction of two flyovers and reconstruction and widening of 22 bridges under two components. The 24 project components listed below include the 20 road sections, the 2 flyovers, and the 2 bridge components. This project included 24 components: 1. Horawela-Pelawatte-Pitigala Road: 0.0 - 17.50 km 2. Horana-Anguruwatota-Aluthgama Road: 5.0 - 32.0 km (total length of 27.0 km) 3. Horawela-Pelawatta-Pitigala Road: 17.5 - 25.74 km (total length of 8.24 km) 4. Construction of a flyover at Mattala airport access road junction in Hambantota Hub Development. 5. Construction of a flyover at 100 feet road and bypass road junction in Hambantota Hub Development. 6. Reconstruction/widening of Bridges on Tiruwanaketiya-Agalawatta Road: 33.45 - 67.80 km (total length of 34.35 km) 7. Reconstruction/widening of Bridges on Horana-Anguruwayoya-Aluthgama Road: 5.0 - 32.0 km (total length of 27.0 km) 8. Thihagoda-Kamburupitiya-Mawarala-Kotapola Road: 23.0 - 67.0 km (total length of 44.0 km) 9. Hungama-Middeniya Road: 0.0 - 30.0 km 10. Nagoda-Kalawellawa-Bellapitiya Road: 27.0 - 57.0 km (total length of 30.0 km) This project included the following components in the Northern Zone : 11. Kandy-Mahiyangana-Padiyathalawa Road: 93.15 - 102.28 km (total length of 9.13 km) 12. Badulla-Karamatiya-Andaulpotha Road: 0.0 - 48 km 13. Mahiyangana-Dimbulagala-Daukkane Road: 0.0 - 24.10 km 14. Bibile-Uraniya-Mahiyangana Road: 22.0 - 39.58 km (total length of 17.58 km) 15. Galkulama-Anuradhapura Road: 0.0 - 15.0 km & 16.0 - 16.64 km (total length of 15.64 km) 16. Kadahapoka-Rambawewa Road: 0.0 - 18.71 km 17. Kurunegala-Narammala-Madampe Road: 0.0 - 22.36 km 18. Galagedara-Rambukkana Road: 0.0 - 18.5 km 19. Tennekumbura-Rikillagaskada-Ragala Road: 20.2 - 73.64 km (total length of 53.44 km) 20. Uswetakeiyawa-Epamulla-Pamunugama Road: 0.0 - 8.05 km 21. Palaviya-Kalpitiya Road: 14.0 - 40.60 km (total length of 26.60 km) 22. Mahiyangana-Dimbulagala-Dalukkane Road: 24.10 - 72.8 km (total length of 48.7 km) 23. Manampitiya-Aralaganwila-Maduru Oya Road: 0.0 - 3.0 km 24. Provincial Roads in Nuwaraeliya District: 85.01 km. Xi'an Dagang Road Machinery Co. Ltd., China National Aero Technology International Engineering Corporation, and Hunan Construction Engineering Corporation were the three contractors responsible for project implementation. Implementation PRP2 began on June 28, 2011 and it was completed on December 31, 2014.
Staff comments
1. AidData has estimated the all-in interest rate (3.361%) by adding 2.9% to average 6-month LIBOR in March 2011 (0.461%). 2. The Priority Road Project had three phases; see Record ID#46971 (PRP1), Record ID#33402 (PRP3-Phase 1), and Record ID#39002 (PRP3-Phase 2) for more details. 3. For the time being, AidData has not populated the insurance fee field. Most Sinosure insurance fees vary between 5-7%. However, the Government of Sri Lanka identifies a 3.26% fee under an 'other payments' column in Annex II of the ERD's 'Global Partnership Towards Development 2013' publication (see https://www.erd.gov.lk/images/pdf/global_partnership_towards_development_2013.pdf). This issue warrants further investigation. 4. The Government of Sri Lanka loan key number is 2011007.