Government to raise Rs 30 bn to pay Central Expressway foreign contractor

COLOMBO (News 1st) - In June 2018, approval of the cabinet of ministers was granted to enter into a loan agreement between the government of Sri Lanka and the Exim Bank of China to obtain a loan of USD 989,448,556 -nearly one billion US dollars. The agreement between the government of Sri Lanka and the Exim Bank was signed on the 22nd of March 2019. A cabinet paper was presented and it was agreed to raise USD 1 billion of which the Sri Lankan government will raise 15%. It is clear that the government now do not have the capacity to pay the money in dollars due to the mismanaged state of the economy. As of now the government is left with no option but to raise the money in Sri Lankan rupees, and pay the contractor in Sri Lankan Rupees. The cabinet paper states that the contractor has agreed to receive the payment in SL Rupees. The funds will thus be made available through loans amounting to Rs 30.4bn raised from state banks. The current state of the state banks with huge non-performing loans including from other state-owned enterprises leaves analysts to ponder whether these will also eventually be classified as non-performing loans. It is an interesting development that the contractor, a foreign party, will accept payments in SL Rupees. Further, this particular action according to industry insiders is to cost the taxpayer 30% more than the cost quoted by local contractors who are working on section 2 of the project.