China Eximbank provides RMB 487 million government concessional loan for Greater Kurunegala Water Supply & Sanitation Project

Project narrative

On September 18, 2013, China Eximbank and the Government of Sri Lanka signed an RMB 487,016,800 government concessional loan (GCL) agreement [CHINA EXIMBANK (2013) 31 TOTAL NO (476)] for the Greater Kurunegala Water Supply & Sanitation Project. The GCL carries the following borrowing terms: a 2% interest rate, a 5 year grace period, a maturity of 20 years, a 0.25% management fee, and a 0.25% commitment fee. China Eximbank disbursed RMB 129,294,990.84 in 2014, RMB 71,322,224.62 in 2015, RMB 50,827,659.58 in 2016, RMB 116,375,945.72 in 2017, RMB 190,284,964 in 2018, and RMB 45,285,961 in 2019. The loan had achieved a 123.8% disbursement rate (RMB 603,391,745.76 out of RMB 487,016,800) as of December 31, 2019. The borrower made no repayments in 2018. The borrower made repayments worth RMB 32,467,786 in 2019, RMB 32,467,787 in 2020 and RMB 32,467,787 in 2021. The loan's amount outstanding was RMB 251,444,875 as of December 31, 2017, RMB 441,729,839 as of December 31, 2018, RMB 454,548,014 as of December 31, 2019, RMB 422,081,227 as of December 31, 2020, RMB 389,613,440 as of December 31, 2021, and RMB 373,379,547 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 Eximbank loans with amounts outstanding at the time of the announcement. The objective of the project was to meet the present and future demand of drinking water in the Greater Kurunegala area by increasing water supply capacity from 6500m3/d to 13000m3/d and establishing a proper waste water disposal system with a capacity 0f 4500m3/d. This project involved the construction of a new treatment plant, a pipe sewer network (135 km), water transmission lines(8km), water distribution network (110km), and two elevated water towers (Kurunagala 1750 m3/d, 750 m3/d at Vahara). China Machinery Engineering Corporation (CMEC) was the contractor responsible for project implementation. The project commenced on February 26, 2014 and was completed on August 13, 2018. Upon completion, the project reportedly covered 397 square kilometers and solved the problem of access to clean drinking water for 600,000 people in 42 villages.