News
Mega projects: Local firms told to find foreign loans
View(s):- No more loans from state banks; China’s MCC returns to complete Central Expressway Kadawatha-Mirigama stretch
By Damith Wickremasekara
President Anura Kumara Dissanayake has informed his Cabinet that in considering mega development projects such as expressways, local parties expecting to bid for them would have to bring funding or loans from overseas, instead of obtaining loans from local banks, the Sunday Times learns.
The President had pointed out that if the local contractors obtained loans from state banks, funding for other development projects, such as rural road projects, could be held up.
The directions come as the Government has opted to continue with the Chinese-state-owned Metallurgical Corporation of China Limited (MCC), a construction conglomerate, to complete the partially built first phase of the Central Expressway project between Kadawatha and Mirigama.
The Road Development Authority (RDA) earlier had proposed handing over the stalled project to local bidders, but the government has taken the decision to go ahead with the Chinese company due to a range of reasons.
Deputy Highways Minister Prasanna Gunasena told the Sunday Times the Government had decided to continue with the Chinese company and funding from the China EXIM bank due to practical difficulties in pursuing other options.
He said that one of the reasons was that to obtain the China Exim bank loan, they had to select the company, MCC, already contrated for the job, but have been able to negotiate a new rate for the loan and change the repayment process from US dollars to Chinese currency.
Mr. Gunasena said that another advantage in going with the MCC would be that they would be able to use the same machinery instead of purchasing new equipment, while the same design could also be used.
The project has been held up since China EXIM Bank suspended all loan disbursements in April 2022 following Sri Lanka’s debt default. Some parts of the construction have already corroded and collapsed.
The Deputy Minister said that an average of Rs 20 million was added on as delay charges.
The 37 km Kadawatha–Mirigama leg was the first section of the Central Expressway. The loan agreement was signed in March 2019 between the China EXIM Bank and Sri Lanka: US$ 989 million to cover 85 per cent of the contract price.
The Government is expecting to resume the project next month.
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