CDB provides $100 million loan for Rehabilitation and Improvement of Priority Road Project 3 - Phase II (PRP3-II) (Linked to Project ID#46971, #39001 and #33402)

On November 24, 2014, China Development Bank (CDB) and the Government of Sri Lanka signed a $100 million loan facility agreement [No. 4510201401100000587] for the Rehabilitation and Improvement of Priority Road Project 3 - Phase II (PRP3-II). This loan carried the following terms: a 15 year maturity, a 3 year grace period, an interest rate of 6-month LIBOR plus a 2.95% margin, a 0.5% management fee, and a 5.9% Sinosure insurance (risk) premium. The loan was apparently secured by (i.e. collateralized against) cash deposits in an escrow account. CDB disbursed $14,855,169.17 in 2016, $32,189,979 in 2017, $3,783,783.61 in 2018, $20,241,605.52 in 2019, $6,457,228 in 2020, and $13,834,687 in 2021. The loan had achieved a 91.3% disbursement rate ($91,362,452.30 out of $100 million) as of December 31, 2021. The borrower made repayments worth $7,700,000 in 2018, $7,700,000 in 2019, $7,700,000 in 2020 and $7,700,000 in 2021. The loan's amount outstanding was $43,195,149 as of December 31, 2017, $54,290,893 as of December 31, 2018, $60,375,271 as of December 31, 2019, $59,132,499 as of December 31, 2020, $65,267,186 as of December 31, 2021, and $61,417,186 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 objective of the project is to improve and rehabilitate priority road sections in Sabaragamuwa and Central Province, as well as to ensure the connectivity among already improved road sections. The following 20 roads are being rehabilitated under the Priority Road Project 3 - Phase II: 1. Katugastota-Medawala Road: 10 km (Kandy District) 2. From Thibbutta Junction to Demaralaawa-Penanetipola-Battagalla Road: 5 km (Kandy District) 3. Hapugahayatatenna-Watadeniya Road: 8 km (Kandy District) 4. Naranwita-Udadeniya-Wewatenna-Niyangama Road: 5 km (Kandy District) 5. Heennarandeniya Junction-Udiwita Elpitiya Road and Elipitiya River-Weligalla Junction: 5 km (Kandy District) 6. From Nilamba Gurukale Junction to Godawala (Doluwa Road) Starting from Kandy Galaha Main Road: 6 km (Kandy District) 7. Kotaligoda-Thismada Road: 5 km (Kandy District) 8. Eramuduliyadda-Kolugala-Thismada Road: 5 km (Kandy District) 9. Nawalapitiya-Nagaswella Road: 11 km (Kandy District) 10. From Wahugapitiya-Nuwara Eliya Road to Doragala Via Chappiliyawatta: 2 km (Kandy District) 11. Yatirawana-Balapola Road: 2 km (Kandy District) 12. A.C.S Hameed Mawatha: 0.9 km (Kandy District) 13. Mahanuwara Aruppola Mawatha No.5 (From Bakery Junction to Aruppola Junction): 0.5 km (Kandy District) 14. Rambukkana-Mawanella Road: 11.79 km (Kegalle District) 15. Bulugolla-Dombemada-Wahauwa Road: 7.65 km (Kegalle District) 16. Mawanella-Aranayaka-Horewela Road: 14.43 km (Kegalle District) 17. Gevilipitiya-Hettimulla Road: 14 km (Kegalle District) 18. Kegalle-Bulathkohupitiya-Karawanella Road: 10.35 km (Kegalle District) 19. Kegalle-Siyabalapitiya-Dewalagema Road: 2.63 km (Kegalle District) 20. Mabopitiya-Degalathiriya Road: 1.75 km (Kegalle District). The project commenced in March 2016 according to the Sri Lanka Ministry of Highways and Investment and was expected to be completed in June 2018. However, as of September 30, 2019, PRP3-II was still ongoing. In December 2020, CDB reportedly stopped providing funding for an unknown reason. The final disbursement period ended on December 31, 2020. The construction was stopped at this time, causing inconveniences to road users.

Additional details

1. The interest rate is coded based on the 6-month LIBOR at time of signing of the loan agreement. The average 6-month LIBOR in November 2014 was 0.327%. The total interest rate is therefore coded as 0.327% + 2.95%, or 3.277%. 2. The Priority Road Project had three phases; see Project ID#46971 (PRP1), Project ID#39001 (PRP2), and Project ID#33402 (PRP3-Phase 1) for more details. 3. The Government of Sri Lanka loan key number is 2014034.

Number of official sources

32

Number of total sources

34