China Eximbank provides $84.989 million buyer’s credit loan for Widening and Improvement of 64.31 km of Roads and Reconstruction of 13 Bridges in Central and Uva Provinces Project

On June 7, 2018, China Eximbank (Hunan Branch) and the Government of Sri Lanka signed an $84,989,000 buyer’s credit loan (BCL) for the Widening and Improvement of 64.31 km of Roads and Reconstruction of 13 Bridges in Central and Uva Provinces Project. This BCL carries the following terms: an interest rate of 6-month LIBOR plus a 2.9% margin, a 17.6 year maturity, a 3.1 year grace period, a Sinosure insurance premium of $1,359,823 (1.6% insurance fee), a 0.5% management fee, and a 0.5% commitment fee. The proceeds of the BCL are to be used by the borrower to finance approximately 85% of the cost of two commercial contracts (worth $99,987,100) with Hunan Construction Engineering Group Co., which were signed in 2019. China Eximbank disbursed $8,387,700.87 in 2019, $28,337,512 in 2020, $34,053,908 in 2021, and $13,849,671.59 in 2022. The loan had achieved a 99.5% disbursement rate ($84,628,792.46 out of $84,989,000) as of December 31, 2021. Its amount outstanding was $33,298,586 as of December 31, 2020, $67,352,493 as of December 31, 2021, and $69,626,238 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 project has two components that are being supported by two separate contracts: (1) C1 for Widening & Improvement of Roads, and (2) C2 for Reconstruction and Improvement of Bridges. C1 involves the widening and improvement of the 7.64 km Kandy-Kirimatiya Road (B195), the 2.25 km Ampitiya-Gurudeniya (Pichchamalwatta Road), the 27 km Nuwara Eliya-Ragala-Udupussellawa Road, the 17.83 km Welimada-Kirkless Road, and the 9.59 km Avissawella-Hatton-Nuwara Eliya Road. C2 involves the reconstruction of Bridge Nos. 24/3 and 42/1 on Tennakumbura-Rikillagaskada-Ragala Road, the reconstruction of Bridge No 3/2 on Kandy Kirimatiya Road, the reconstruction of Bridge Nos. 23/3, 27/2, 30/4, 31/5, 34/8, 37/1 and 38/5 on Nuwara Eliya-Ragala-Udapussellawa Road, and the reconstruction of Bridge Nos. 1/1, 2/5, and 7/7 on Welimada-Kirkless Road. Hunan Construction Engineering Group Corporation is the contractor responsible for implementation. This project entered implementation on November 29, 2018. According to Sri Lanka's Road Development Authority, as of September 30, 2019, the C1 component of this project had achieved a 25% completion rate and the C2 component of this project had achieved a 37% completion rate. As of June 30, 2020, the C1 component of this project was 62% complete and the C2 component was 73% complete. The project was originally expected to reach completion in May 2021.

Additional details

1. This project is also known as the Road Network Improvement Project (RNIP). The Chinese project title is 斯里兰卡中部和乌瓦省13座桥梁重建和64.31公里道路扩建与等级提升项目. 2. One source identifies the maturity of the China Eximbank loan as 18 years and the grace period as 3 years. 3. One of the two commercial contract identification numbers is RDA/EXIM/COM/2019-078. The other is unknown. This issue merits further investigation. 4. This $84.989 million China Eximbank loan is not included in the China’s Overseas Development Finance Dataset that Boston University's Global Development Policy Center published in December 2020. 5. The Government of Sri Lanka loan key number is 2018022. 6. 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 1.6% fee in the Ministry of Finance's 'Annual Report 2020' publication (see https://www.treasury.gov.lk/api/file/f64f9700-0402-49d0-9f38-f28629a8c379). This issue warrants further investigation.

Number of official sources

33

Number of total sources

35