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Previous Govt. pushed interest rate up for Hambantota port loan: SLPA
The interest rate on the Chinese loan for Hambantota Port Phase I was increased from around 2 per cent to 6.3 per cent (fixed) on a request by the previous regime, a top official at the Sri Lanka Ports Authority explosively revealed this week. He also said that, this year, Sri Lanka will shell out Rs 7 billion in loan commitments for Hambantota Port alone. Three billion rupees was paid in January 2015 to the Export Import Bank of China. Another Rs. 4 billion is due this month. The income from that port does not meet even a fraction of the required funds.
“It took us some time to understand what was actually going on with Hambantota,” said Dr. Lakdas Panagoda, Sri Lanka Ports Authority chairman, in an interview with the Sunday Times. He was appointed in January, shortly after the election of President Maithripala Sirisena.“Initially, the loan for the first phase was to be about US$ 350 million, inclusive of certain equipment,” the chairman revealed. “Once the project started, the allocation was deemed insufficient.”
“Further facilities were obtained, making the amount US$ 500 million,” he said. Inexplicably, the quantity of equipment first agreed upon was then decreased. “We got affected in two ways—higher loan and less equipment,” the chairman pointed out. The biggest mystery relates to the interest payable on the loan. The contract was awarded on an unsolicited bid to China Harbour Engineering Co. & Sinohydro Corporation Ltd. The Export Import Bank of China met 85 per cent of the project’s cost.
The interest was first set at 0.9 per cent plus LIBOR, or around 2 per cent per annum. “Then, for whatever reason, this was changed to a fixed rate of 6.3 per cent,” said Dr. Panagoda. “We checked the paperwork and it showed that the request was made by Sri Lanka. To date, we do not know why.”
An agreement has also been signed for the second phase of Hambantota Port which will cost US$ 808 million. The loan is to be disbursed in three tranches: The first is US$ 600 million at 2 per cent interest; the second is US$ 51 million at 4 per cent plus LIBOR; and the third is US$ 157 million at a fixed rate of 2 per cent.
The management could not explain the difference in terms. “We don’t know the reason,” Dr Panagoda said. “We are studying the files and going through all the agreements.”
The Government has already drawn US$ 500 million in funds for Phase II. “If you want an idea of what our commitments are right now, we are paying two instalments a year for Hambantota,” the chairman revealed. “In January, we paid Rs. 3 billion and there is another instalment of Rs. 4 billion in June.”