Former MP Ranawaka ‘right on the money’ on Japanese loans

9 July 2020 12:02 am - 2     - {{hitsCtrl.values.hits}}

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FactCheck evaluated the former MP’s statement using data obtained from the Department of External Resources on foreign loan commitments to Sri Lanka. The analysis was limited—based on the availability of data—to loans received from 2005 to 2019 (Exhibit 1). 


During the period, in terms of the value of loans—outside of international sovereign bonds—Japan was the third largest source of borrowing for Sri Lanka overall. Moreover, it was the second largest bilateral lender after China. 


Japan has also lent at the most favourable terms. Exhibit 1 shows that the weighted average interest rate of Japanese loans was 0.73%, which is significantly lower than that of other lenders—including other bilateral lenders such as China and multilateral organisations such as the World Bank. 

Furthermore, the effective interest on these loans in USD terms is even lower due to: (a) all loans being denominated in JPY (Japanese Yen)—which depreciated against the USD during this period, and (b) the inclusion of concessional terms, such as grace periods prior to initiating repayment.


Thus, in the 2005-2019 period, Japan has provided the highest level of loans at the lowest interest rate to Sri Lanka.
Therefore, we classify the former MP’s statement as TRUE.


*FactCheck’s verdict is based on the most recent information that is publicly accessible. As with every fact check, if new information becomes available, FactCheck will revisit the assessment.


NB: To learn more about the calculations behind this fact check, see Verité Research’s upcoming report on foreign financing of infrastructure projects in Sri Lanka: Financing infrastructure: Can “concessional” loans be too expensive?

 

2. When loans with multiple interest rates for different tranches/periods had different interest rates the highest rate was used for calculating the above numbers, and service/consultant fees on loans have not been included in the interest rate assessment. 

 

 

FactCheck is a platform run by Verité Research. 
For more fact checks, visit our website at
www.factcheck.lk. 

 

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  Comments - 2

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  • EngDG Thursday, 16 July 2020 10:43 AM

    Remember Japanese assistance in the port sector to modernize Colombo Port from 1980 to around 2000 with several loans at low interest. Port gained extensively. Only issue was appreciating Jap Yen against Rs as Budget is in Rs. Attempts made sometimes to re-schedule those loans also.

    Bahoo Thursday, 16 July 2020 09:29 PM

    Japanese loans at 0.73%. China at 3.26%. !!!!! And we lent Stg. 50 million to England in the early 1940s to fight off the nazis!!


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