Chinese EXIM Bank increases interest rate from 2.5 per cent to 3.5 per cent

By Yohan Perera and Ajith Siriwardana

Colombo, October 4 (Daily Mirror) - The Committee on Public Finance (COPF) which said that EXIM Bank of China had increased the interest rate from the initially agreed 2.5 per cent to 3.5 per cent for the loan extended to finance the Kadawatha -Mirigama stretch of Central Express Way, requested the government to re-negotiate it.

Expressing his views on the development, the COPF Chairman, Opposition MP Harsha de Silva, questioned the officials as to why they had agreed to an interest rate range increase up to 3.5 per cent, despite the initially proposed fixed rate being 2.5 per cent.

The officials from the Ministry of Transport, Highways, and Ports have informed the recent COPF meeting that a sum of US $ 500 million is expected to be obtained from the EXIM Bank of China for the Kadawatha –Mirigama stretch of the Central Expressway at a rate of 3.5 per cent.

Expressing his views, the Committee Chairman de Silva questioned the officials as to why they had agreed to an interest rate range going up to 3.5 per cent, despite the initially proposed fixed rate being 2.5 per cent. In response, the officials explained that under current market conditions, the EXIM Bank had not agreed to provide the loan at a 2.5% fixed rate. As a result, the Bank had agreed to a floating interest rate with a maximum cap of 3.5 per cent. They also indicated that further negotiations were expected to be held with the EXIM Bank with a view to revising the interest rate. COPF chairman has stressed that the interest rate should be reconsidered as the current rate could potentially lead to an unfavourable situation for Sri Lanka.

The length of the Kadawatha–Mirigama section of the Central Expressway is 36.475 kilometres. They further mentioned that a loan of $ 500 million is expected to be obtained from the EXIM Bank of China, with the remaining required funds anticipated to be sourced locally to complete the project.

Meanwhile, the COPF also considered the supplementary estimates for the year 2025 under the Ministry of Transport, Highways, Ports and Civil Aviation for the approval of Parliament to settle a portion of the loan taken by the Road Development Authority for road development projects.

Officials of the Ministry of Transport, Highways, Ports and Civil Aviation told the committee that the amount of loan borrowed by the Road Development Authority from local banks for road construction amounted to over Rs. 310 billion as of 31.07.2025. Accordingly, the officials informed the Committee that they expect to obtain Rs 36 billion through the supplementary estimate that is to be approved by Parliament. This is to be used to repay loans. Accordingly, the supplementary estimate was approved after consideration of all aspects by the Committee.

Furthermore, officials from the State Debt Management Office, summoned before the committee to discuss the current amounts of foreign and domestic debt.

It was reported that foreign debt services amounting to $ 37 billion and domestic debt totalling Rs. 19.6 trillion remain to be repaid. The Committee Chairman inquired about the amount of loan instalments payable this year. He expressed dissatisfaction with the officials’ inability to provide the exact figures at the time of the meeting. Dr. de Silva reminded the committee of the importance of hiring skilled personnel within the State Debt Management Office to manage the loan acquisition processes effectively, as these are currently managed solely by that office.

MPs Ravi Karunanayake, Sunil Rajapaksa and Nishantha Jayaweera participated in this meeting.