Sri Lanka enjoys lowest interest rates on loans, say main Chinese lenders
Posted on March 26th, 2015

By Shehan Baranage Courtesy Adaderana

Main Chinese lenders to Sri Lanka say they have offered the best interest rates to Sri Lanka for their loans and that they do not have any hidden agendas in lending to this country.We do not have strings attached to these loans as some others have,” firmly reiterated a top official of the China Development Bank while adding that the institution is accepted by over 100 countries in the world.

Two of the largest Chinese lenders to Sri Lanka, the China Development Banks and the Export Import Bank of China (EXIM) say their interest rates have been minimal compared to the bonded loans obtained by the Sri Lankan government which sometimes even exceeded 6 per cent.

The largest development financial institution in the China, the China Development Bank which is in possession of a 1.63 trillion US dollar capital said that the loan commitment to Sri Lanka is 3.5 billion US dollars with a total of 19 projects.

Since 2010 the CDB has offered credit to the tune of USD 1.205 billion as loans to Sri Lanka’s transport, postal development and road reconstruction projects while the CDB had provided loans to Sri Lanka’s major private and state banks as well.

However, when questioned regarding the criticisms levelled at the bank on high lending interest rates and attached conditions, the CDB official was fast to respond sternly that they never laid any political conditions and that the only conditions were commercial that are common to any loans and rejected such criticisms of high interest rates of as much as over 6 per cent. He said the bank’s interests rates were very much lower than the rates offered to the foreign bonds which the CDB says are much higher and almost around 7 per cent.

Meanwhile, the present government when earlier in the opposition slammed the previous administration for borrowing from the CDB and EXIM banks at higher interest rates instead of borrowing from the traditional formal institutions such as the Asian Development Bank and the IMF at much lower rates of around 0.2 to less than 01 percent. They openly stated that they would renegotiate the loan facilities to reduce the interest rates with the main Chinese lenders.

However when asked from the CDB and EXIM banks if they were willing to renegotiate these facilities, the officials said that they are willing to corporate with the present government but that they believe the agreements already signed by the counties would not change even if governments change.

Therefore, this may mean that both institutions are not willing to redo the blue prints of these agreements.

As a developing country, China too needs capital for its own development and hence they have offered Sri Lanka very reasonable rates in lending, a top official attached to the Export Import Bank of China added.

However the both financial institutions were very concerned over the temporary suspension of the Colombo Port City development project, which they said could be the Singapore of South Asia when completed.

I is learned that CDB has provided a loan facility to China Harbour Engineering Company to the tune of USD 775 million though the company had said that it was a total direct investment of USD 1.4 billion in Sri Lanka.

2 Responses to “Sri Lanka enjoys lowest interest rates on loans, say main Chinese lenders”

  1. Dilrook Says:

    It is easy to quantify the interest rate but there are other costs of borrowing like IMF dictates, governance dictates, human rights dictates and other intereferences that cost a fortune. Due to IMF dictates Sri Lanka privatised all profit making state entities leaving behind only loss making ones. The loss to the nation is in billions of dollars. This is the real cost of borrowing from the IMF, ADB, WB, etc.

    Co-chairs (US-EU-Japan donors) were no better. They pushed the government to put up with LTTE terrorism for a few hundred million dollars. LTTE controlling Vanni alone costed the country many times more, every year.

  2. Nimal Says:

    No time to read,if loans on very low rates are available to private sector business people will be great, good for the economy of the island

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