President Anura Kumara Dissanayake has sought Cabinet approval to secure the equivalent of US$500 million in renminbi (RMB) from the Export-Import (EXIM) Bank of China, along with the allocation of US$438 million from Sri Lankan government funds, to complete the long-delayed first section of the Central Expressway (CEP 1).
The proposed borrowing arrangement poses a repayment challenge, as Sri Lanka does not generate income in RMB. This would require the country to convert its US dollar reserves to service the loan. Additionally, the shift in loan currency from USD to RMB—requested by China EXIM—necessitates an amendment to the original commercial contract agreement, for which Cabinet approval is also being sought.
Earlier this month, a committee tasked with reviewing outstanding claims from the Metallurgical Corporation of China Ltd (MCC), the contractor for the 37.1-kilometre Kadawatha-to-Mirigama stretch, recommended settling the multibillion-rupee payments owed and continuing with the same contractor for the remainder of the expressway.
The China EXIM Bank-funded project has seen only 36.38 per cent physical progress since construction began in September 2020. Work was severely delayed by Sri Lanka’s economic crisis, which led to the suspension of loan disbursements and prolonged debt restructuring negotiations.
The Government of Sri Lanka first signed a preferential buyer’s credit agreement with EXIM Bank in March 2019 to finance CEP 1. An amendment to that agreement was concluded in June 2024 under the country’s external debt restructuring process.
In April this year, the Ministry of Finance, Planning and Economic Development—under President Dissanayake’s purview—informed EXIM Bank of Sri Lanka’s willingness to proceed with the project under its financing. EXIM responded by requesting a change in the loan currency. Subsequent discussions covered loan terms including the amount, repayment conditions, and interest rates, ultimately setting an interest rate cap and floor between 2.5% and 3.5%.
The original concessional loan package from EXIM Bank was valued at US$989 million, of which only US$51.5 million was disbursed before suspension. While the remaining amount stood at US$938 million, the restructured terms now reduce EXIM’s commitment to US$500 million in RMB. Consequently, the Sri Lankan government has agreed to provide the remaining US$438 million from its own funds.
As part of the resumed contract, the Government will also be required to settle approximately US$200 million in contractor claims and interest. Meanwhile, a proposal by five of Sri Lanka’s largest construction firms to terminate the direct contract awarded to MCC in 2015-16 and instead call for fresh, competitive tenders—arguing this would lower costs and accelerate project completion—has been set aside.
