Sri Lanka in talks with China for $1 billion loan
Posted on June 20th, 2019

Courtesy  Saudi Gazette

COLOMBO — Sri Lanka is seeking a loan of nearly $1.0 billion from China for energy and highways as the island recovers from the devastating Easter Sunday bombings, the finance ministry said Thursday.

Talks are underway with China’s Asian Infrastructure Investment Bank (AIIB) to raise the new loan in addition to the $1.2 billion obtained from international agencies this year, the ministry said.

“We have been discussing with the AIIB to obtain nearly an additional US$ 1,000 million for further development of the Power and Highway sectors,” the ministry quoted Finance Minister Mangala Samaraweera.

Sri Lanka’s former government borrowed heavily to rollout ports, highways and railroads, but several ambitious infrastructure projects ended up as white elephants and left the country facing a mountain of debt — mainly to China.

Unable to service its loans, the government of Prime Minister Ranil Wickremesinghe leased a Chinese-built port at Hambantota to a Beijing company for $1.12 billion in 2017.

Samaraweera said the country was able to maintain economic stability despite the April 21 attacks that killed at least 258 people at three churches and three luxury hotels.

The government expects tourism to decline 30 percent this year as a result of the suicide bombings. The loss of revenue has been estimated at $1.5 billion.

The minister’s remarks came as the census department said the country’s economic growth in the first quarter of this year was 3.7 percent — better than the 3.5 percent forecast by the authorities.

That compares to 1.79 percent in the final quarter of 2018 and 4.02 percent a year earlier.

Last month, the Central Bank of Sri Lanka cut its main lending rate by 50 basis points to 8.5 percent to encourage borrowing and mitigate any fallout from the bombings.

Forty-five foreigners were among the dead from the April 21 suicide attacks and nearly 500 people were wounded.

The government has begun subsidizing loans to hotels which were already suffering a declining in foreign guests following last year’s political crisis.

The country had plunged into turmoil in October when President Maithripala Sirisena sacked his Prime Minister Ranil Wickremesinghe and called fresh elections.

However, the Supreme Court held that the president’s actions were illegal and restored the status quo. But, three international credit rating agencies downgraded the country’s debt making it more expensive to borrow abroad.

Official figures show that Sri Lanka will have to repay a record $5.9 billion in foreign loans in 2019. Officials say about two-thirds of it has already been paid. — AFP

2 Responses to “Sri Lanka in talks with China for $1 billion loan”

  1. aloy Says:

    China’s loans are being used to propagate corruption: How about paying $90 million for project management (supervision) of a 26km road on flat terrain on Matara-Humbantota section of Southern Expressway and also inflating the price that was fixed earlier at Rs. 8 billions to Rs. 28 billion. Where in the world this sort of things happen?.This is outright robbery of poor people’s money. Last couple of days the TVs were showing how children living in remote areas dying of starvation. This is the order of the day.

    We ask China not to give anymore loans to a government that is misusing people’s money. Let them cut down import of luxury cars and other items that can be produced at home and used that savings to pay the loans already taken.

    We have to warn the government officials and the consultants who recommended those inflated contracts and made ordinary people suffer, that one day, ‘the day of reckoning’ will surly come.

  2. Nimal Says:

    Well said Aloy but you never mentioned this when the past regimes were at it.
    If the Chinese or any foreign power wants to give loans then let them give direct contracts to private firms who are more accountable to the people who pay for it.

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