Saddled with heavy debts, and facing a financial crisis brought on by the coronavirus, Sri Lanka appears to be piling on more Chinese debt despite having to pay millions of dollars this year to service its current obligations.
Sri Lanka premier bank, Bank of Ceylon (BOC) and China Development Bank will enter into a USD 140 million long-term facility where drawdown will be under two tranches of USD 70 million each.
The signing ceremony for the facility agreement was held today Tuesday on 30 June 2020.
The facility will be utilized for supplementing BOC, which will provide much needed support during Sri Lank's fight against COVID-19.
China Development Bank Corporation has also loaned Sri Lanka a billion US dollars, in response to a call for market borrowings in 2018, but it was below market rates at the time of 2.56 percent for eight years, mostly as a bailout, fiscal analysts said.
Sri Lanka will also borrow Rs. 15 billion from China Development Bank to develop 105 kilometres of roads.
Accordingly, the Akuressa-Kamburupitiya road, Beliatta-Kirinde stretch of road, Tangalle-Weeraketiya road, Wallasmulla-Weeraketiya road, Kotuwana-Uru Bokka road, and Parandeniya-Hakmana road were among those selected.
“CDB’s loan for Sri Lanka is politically motivated, not commercially driven. This type of lending is akin to a sovereign wealth fund pursuing the state objective,” said one banker in Singapore.
“CDB has faced criticism in the past for cut-price lending, but has largely avoided competitive situations in recent years.
As the largest Commercial Bank in Sri Lanka, BOC considers itself as the bankers to the nation, while China Development Bank is the world's largest development financial institution and the largest Chinese bank for financing cooperation, long-term lending and bond issuance.