CDB provides $152.8 million loan for Rehabilitation and Improvement of Priority Road Project 1 (PRP1) (Linked to Record ID#39001, #33402 and #39002)

Project narrative

On December 16, 2010, China Development Bank and the Government of Sri Lanka signed a $152,479,685 loan agreement (No. 4500402212010110492) for the Priority Road Project-1 (PRP1). This loan carries the following terms: a 15 year maturity, a 3 year grace period, an interest rate of 6-month LIBOR plus a 2.9% margin, a 0.5% management fee, and a 5% Sinosure insurance (risk) premium. The borrower was expected to use the proceeds of the loan to partially finance a commercial contract [ID# RDA/RNIP/PRP1/PACKAGE - A (C1A, C2A, C3, C6A, C8)] between Sri Lanka's Road Development Authority (RDA) and China National Aero Technology International Engineering Corporation (CATIC), which was signed on December 21, 2010. CDB disbursed $123,291,010.26 in 2012, $24,315,344.88 in 2013, $22,544,790.73 in 2014, and $7,560,640.44 in 2015. The loan had achieved a 116.3% disbursement rate ($177,711,786.31 out of $152,800,000) as of December 31, 2015. The borrower made repayments worth $11,750,000 in 2018, $11,750,000 in 2019, $11,429,685 in 2020 and $11,750,000 in 2021. The loan's amount outstanding was $93,715,455 as of December 31, 2017, $81,965,455 as of December 31, 2018, $70,215,455 as of December 31, 2019, $58,785,770 as of December 31, 2020, $47,035,770 as of December 31, 2021, and $47,035,770 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 purpose of the project was to provide an efficient national road network that would lower transportation costs and improve the integration of the country. The project sought to construct or rehabilitate 9 different road segments: (1) the 7.47 km Beliatta Tangalle Road on the C1A; (2) the Bopale - Kiribbanara - Uadamauara Road on the C12A; (3) the Flyover at Siribopura Junction on the C1A; (4) the 47 km Pelawatta Kankotiyawatta Thiniyawala Morawaka Road on the C2A; (5) the 0 - 033.45 km Thiruwanaketiya Agalawatta Road on the C3; (6) the 20.5 km Kandy - Mahiyangana- Padiyathalawa Road on the C6A; (7) the 5.63 km Kalkudah Road on the C8; (8) the 4.42km Kalkudah Valachchenai Road on the C8; and (9) the 52 km Paranthan Mullaitivu Road on the C11. China National Aero Technology International Engineering Corporation (CATIC-ENG) is the contractor responsible for project implementation.Its work was overseen by the Government of Sri Lanka’s Road Development Authority. Project implementation began on December 29, 2010 and was originally scheduled for completion by December 29, 2014. However, the project did not reach completion until December 31, 2015.