China Eximbank provides $48.3 million buyer’s credit loan for Northern Road Rehabilitation Project (C2) (Linked to Record ID#71641, #71642, #71643, #71644, #71646, #71647)

Project narrative

On April 29, 2011, China Eximbank and the Government of Sri Lanka signed a $48,337,233 buyer’s credit loan (BCL) agreement [No. BLA 201111] for the Northern Road Rehabilitation Project (C2). The BCL carries the following borrowing terms: a 6-month LIBOR plus a 2% margin, a 15-year maturity, a 3-year grace period, a 0.5% management fee, a 0.7% commitment fee, and a 6% Sinosure insurance premium (exposure fee). China Eximbank disbursed an unknown amount in 2011, an unknown amount in 2012, $13,499,882.22 in 2013, $12,678,718.48 in 2014, and $1,584,648.31 in 2015. The borrower made repayments worth $4,028,102 in 2018, $4,028,102 in 2019, $4,028,103 in 2020 and $4,028,102 in 2021. The loan's amount outstanding was $38,266,978 as of December 31, 2017, $34,238,873 as of December 31, 2018, $30,210,771 as of December 31, 2019, $26,182,668 as of December 31, 2020, $22,154,566 as of December 31, 2021, and $20,140,519 as of June 30, 2022. The purpose of the Northern Road Rehabilitation Project (C2) was to rehabilitate the 67 km Navatkuli-Karaitivu-Mannar (A032) Road. C2 stands for Contract 2. China Harbour Engineering Corporation was the contractor responsible for project implementation. 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 preliminary works of the project commenced on November 10, 2011. The project was originally slated for completion by May 9, 2014. The activities of the project had been “substantially completed” by May 12, 2014 and handed over to Sri Lanka’s Road Development Authority. However, the project was not fully and officially complete until December 31, 2014.