Sri Lanka borrows one billion from China for highway

What to know?

• Sri Lanka, which last year handed over a strategic port to a Chinese firm for a 99-year lease as a debt swap, will soon sign a USD 1 billion consessional loan agreement with Beijing to fund a major highway project linking Colombo to the hill resort of Kandy.
• The construction of the first phase of the road linking Colombo with Kandy had been delayed for more than two years due to a lack of funding.
• The USD one billion will be used for the first stage of the central highway.
• The second stage will be financed by Sri Lankan consortiums and the third by Japanese loans.
• The envoy thanked China which he said had provided assistance to Sri Lanka in both long-term project loans and day-to-day needs.
• Playing down the allegations that China’s financial assistance to Sri Lanka has led it into a debt trap. Sri lanka refused to blame China or another country.
• According to reports, Sri Lanka owed USD eight billion debt to China.
• Colombo has borrowed from many countries, including India and Japan, as well as multilateral organisations.
• Sri Lanka is in talks with China on a free trade agreement.
• Colombo port is a very crucial transit port serving India. India’s strong economy will prop up the port as a successful entity.
• Sri Lanka last year granted a 99-year lease on Hambantota port to a Chinese firm over its inability to repay loans to Beijing for the USD 1.4 billion project.

Hambantota port

• The Hambantota Port (also known as the Magampura Mahinda Rajapaksa Port) is a maritime port in Hambantota, Sri Lanka.
• The first phase of the port was opened on 18 November 2010, with the first ceremonial berthing of the naval ship “Jetliner” to use the port facilities.
• It is named after former President Mahinda Rajapaksa.
• Hambantota Port is built inland and operated by the Sri Lanka Ports Authority.Total estimated construction cost of the Phase 1 of the project is US $361 million, out of which 85% was funded by the EXIM Bank of the People’s Republic of China.
• The Port of Hambantota will serve ships travelling along the east-west shipping route which passes six to ten nautical miles (19 km) south of Hambantota.
• The first phase of the port project will provide bunkering, ship repair, ship building, and crew change facilities.
• However, the Hambantota Port in 2016 made a revenue of US$11.81 million and incurred expenses of US$10 million as direct and administrative costs to report an operating profit of just US$1.81 million.
• As the port incurred heavy losses, making debt repayment difficult, in 2016 it was proposed to lease 80% of the port in a debt-for-equity swap to the China Merchants Ports holding company(CMPort), who will invest US$1.12 billion to revive the port under a public–private partnership. 
• In July 2018, it was announced that Sri Lanka would relocate its naval base at Galle to Hambantota.

(International)(The hindu, business standard )

 Pic courtesy:SouthChinaMorningPost