News
No signs of China Exim Bank loan for Central Expressway despite talks
View(s):By Namini Wijedasa
A loan sought by the Sri Lankan government from the Exim Bank of China as part-funding for Stage 1 of the Central Expressway Project (CEP 1) has still not come through despite protracted negotiations, official sources said.
The government has allocated Rs. 66.15bn through the 2026 budget to resume work on CEP 1, which runs 37.1 km from Kadawatha to Mirigama, and work continues amidst the long lag in obtaining a new loan from the Chinese government to finish this stretch.
The Sri Lanka Government and the EXIM Bank of China first entered into a preferential buyer’s credit agreement to finance CEP 1 as early as March 2019. Construction started in September 2020. But the project was stalled for months at a mere 36.38 per cent physical progress.
Recent delays were largely attributed to Sri Lanka’s economic crisis, which caused the suspension of loan disbursements from the Exim Bank and a lengthy debt restructuring process. An amendment to the original contract was signed in June 2024 under Sri Lanka’s external debt restructuring process.
Last year, the government sought to borrow anew the equivalent of US$500 mn in renminbi (RMB) from the Exim Bank of China while deciding to separately disburse US$438 mn of Sri Lankan government funds to complete this long-delayed section.
This meant that Sri Lanka, which has no RMB income, will have to convert its US dollar reserves to repay the loan. The change in loan currency from US dollars to RMB was at the request of China Exim.
Sri Lanka also settled outstanding financial claims from the Metallurgical Corporation of China Ltd (MCC), the contractor for the 37.1 km stretch from Kadawatha to Mirigama. The company has been retained to build the remainder of the road.
But while bilateral discussions were subsequently held regarding the loan currency, amount, interest rate, etc., China Exim has still not finalised the RMB loan, raising concerns that the Sri Lankan government will have to finance the entirety of the road.
The original EXIM Bank concessional loan was US$989 mn, of which just US$51.5 mn was disbursed before its suspension. While the remainder is US$938 mn, EXIM, post-debt restructuring, has now only committed to lending US$500 mn in RMB. Consequently, the Sri Lanka Government has undertaken to fork out the remaining US$438 mn.
Meanwhile, the Road Development Authority (RDA) will next week call tenders for the second part of the Central Expressway Project stage III (CEP3) from Rambukkana in Kegalle to Galagedara in Kandy, officials said.
Bids are sought from local companies. The tender will not be advertised abroad. The government will fund the project, with Rs. 20 bn having been allocated in the 2026 budget to start building.
A further Rs. 10.5bn was set aside to finish the first leg of CEP 3, which runs from Pothuhera in Kurunegala to Rambukkana. Construction is nearing completion.
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