Rs 60bn loans from state banks to construct the Central Expressway due to absence of FDI

COLOMBO (News 1st):- The Sunday Times reported today (October 13) that in the absence of foreign investments for sections of the Central Expressway project, the Cabinet has approved a proposal by the Ministry of Highways and Road Development to obtain a loan of Rs 60 billion from three state banks. The article reads approval has been granted to obtain funding from the People’s Bank, the National Savings Bank and the Bank of Ceylon to complete the section between Mirigama to Kurunegala, stage II of the Central Expressway. As security for the loans, the Ministry has proposed that the annual toll collections from the other expressways could be made use of, with the toll revenue set to increase by next year. The project was due to be completed in November this year but has now been delayed till May next year. The Cabinet paper has noted that if the work of the project is stopped, heavy compensation will have to be paid to contractors with a drastic social impact due to a stoppage of employment of around 5,000 direct employees of the local contracting companies. The paper also notes that in addition, other road construction contracts already awarded to various construction companies have been held up due non-availability of funds to pay compensation for land acquisition amounting to Rs 9.5 billion. It also claims heavy compensation will have to be paid to these contractors as well if the projects are delayed. At a time, when it is nationally acknowledged that Sri Lanka's economy has been severely mismanaged, it raises serious concerns that this government is proposing to add to the burden of the state banks. Contractors involved in the second phase of the highway project have already relied on the state banks for funding. The state banks are yet to see a return. Individuals and corporates, enjoying political patronage with this government have used this position to obtain vast funds from the State Banks and several of them have ended up in the non-performing portfolio of the banks. The loans outstanding for the building of highways during the Rajapaksa administration are still being paid and this government, stuck as it is for money, is now proposing to fund new borrowing, by using the proceeds from the toll fees of the expressways as a guarantee. It would be relevant to establish if ministers responsible for this series of mismanagement will be held accountable. Included in this series of financial mismanagement is the classic example of the Rajagiriya flyover which has done nothing to ease the burden of traffic, thanks to the faulty direction of the layout of the bridge. It becomes clear that contractors who currently enjoy close links with the government and its ministers have successfully managed the pursuit of profit, at the expense of the public need.