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

• A sum of US $ 500  million is expected to be obtained from the EXIM Bank of China

By Yohan Perera and Ajith Siriwardana   

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.