First tranche of Chinese loan this week

By Skandha Gunasekara

Sri Lanka is to receive a $ 2 billion loan from China and the first tranche is expected as early as this week, The Sunday Morning learnt.
The Sri Lankan Government reached an agreement with China for a $ 1 billion loan for use of the Treasury. The Government also reached an agreement with China for another $ 1 billion loan for the Central Expressway Project.
Ministry of Finance and Mass Media Director of Information Mohamed Ali Hassen told The Sunday Morning that a tranche of $ 300 million of the first $ 1 billion loan is expected to be received by Sri Lanka this week.
“Negotiations on the terms for the loan are ongoing and the Bank of China is expected to give us the loan this week,” he said.
He said that while the terms of the loan were still being negotiated, it would be given on six-month London Inter-banking Offered Rates (LIBOR) and that the interest rates should be less than 3% in addition to the loan conditions.
He added that the loan would be given to the Treasury, and that it was for Government use and not for any development project. He added that the remaining $ 700 million of the loan would be negotiated thereafter.
Meanwhile, the Government sought to procure another loan of $ 1 billion from China’s EXIM Bank for the construction of the Central Expressway connecting Colombo and Kandy.
Hassen said that Cabinet approval was already given to enter into negotiations with the bank on the terms and conditions of the loan. He said that the loan would be used for the first phase of the Central Expressway Project.
Furthermore, Hassen revealed that after negotiating the financial aspects of the loan, the Government may call for tenders from Chinese construction companies to carry out the construction of the first phase of the Central Expressway.
The Government is to repay debts of $ 5.9 billion in foreign loans this year.