China Eximbank provides $31.6 million buyer’s credit loan for Procurement of Material for the Northern Province Power Sector Development Programme (Uthuru Wasanthaya)

Project narrative

On September 9, 2010, China Eximbank and the Government of Sri Lanka signed a $31,659,391.82 buyer’s credit loan (BCL) agreement [BLA201001] for the Procurement of Material for the Northern Province Power Sector Development Programme (Uthuru Wasanthaya). The face value of the BCL was subsequently downsized to $30,715,481. The BCL carried the following borrowing terms: an interest rate of 6-month LIBOR plus a 2.4% margin, a 15 year maturity, a 5 year grace period, a 0.7% commitment fee, a 0.5% management fee, and a 9% Sinosure insurance premium. China Eximbank disbursed an unknown amount in 2010, and unknown amount in 2011, $13,094,016.22 in 2012, $3,560,000 in 2013, and $8,973,010.97 in 2014. The borrower made repayments worth $3,071,548 in 2018, $3,071,548 in 2019, $3,071,548 in 2020, and $3,071,548 in 2021. The loan's amount outstanding was $13,033,067.70 (Rs. 1,663,182,352) as of December 31, 2012, $8,675,784 (Rs. 1,120,441,066) as of December 31, 2013, $19,965,063 as of December 31, 2017, $16,893,515 as of December 31, 2018, $13,821,967 as of December 31, 2019, $10,750,419 as of December 31, 2020, $7,678,871 as of December 31, 2021, and $6,143,096 as of June 30, 2022. The purpose of the project was to procure materials for the provision of electricity to 80,000 consumers living in Northern Province by constructing 400 rural electrification schemes. China National Complete Plant Import & Export Corporation (COMPLANT) was the contractor responsible for project implementation and its work was overseen by the Ceylon Electricity Board (CEB). The project commenced on September 9, 2010, and according to the Government of Sri Lanka’s External Resources Department (ERD), it reached completion on September 9, 2012. However, the Uthuru Wasanthaya Project has also been plagued by controversy. A fraud investigation revealed that the contractor provided substantially fewer materials than it was contractually obligated to provide. Debt repayment problems have also arisen. 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.