$ 700 m loan from China Development Bank: $ 200 m still up in the air


The Sri Lankan Government is still negotiating with its Chinese counterparts to obtain the balance $ 200 million out of the $ 700 million the country requested from the China Development Bank (CDB) last year. 

State Minister of Money, Capital Markets, and State Enterprise Reforms Ajith Nivard Cabraal, when inquired as to when the balance tranche would be received, stated that it will be announced once the negotiations are finalised.

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With Sri Lanka having received only $ 500 million out of the requested $ 700 million from CDB in the first half of this year, there is now ambiguity surrounding the payment of the balance $ 200 million, which on previous occasions was said to be due in June or July this year. 

All attempts to reach the Central Bank of Sri Lanka (CBSL) and the Treasury for further information on this matter proved futile. However, the recent statement issued by Central Bank Governor Prof. W.D. Lakshman, explaining Sri Lanka’s upcoming external debt obligations and the financial assistance that would be received from multilateral and bi-lateral lenders, did not mention this $ 200 million from CDB. 

In addition to the $ 700 million requested from CDB, the People’s Bank of China recently approved a swap facility of $ 1.5 billion to the CBSL. This agreement, signed between the CBSL and the People’s Bank of China, is valid for three years, and the deal was made during a time Sri Lanka was struggling with the Covid-19 pandemic.

The swap facility, as confirmed by the Central Bank, was in Chinese currency, which faced wide criticism from local economists and the Opposition, as Sri Lanka could only settle debts incurred on imports from China using this particular swap, as most of Sri Lanka’s external invoices are in US dollars. 

China has further agreed to provide a $ 989 million loan to Sri Lanka to build an expressway that will connect its central region to the Chinese-run seaport, which is part of Beijing’s plan for a line of ports stretching from Chinese waters to the Persian Gulf. Accordingly, as per the study conducted by the Chatham House, reports claim that the cumulative value of Chinese infrastructure investment to Sri Lanka amounted to $ 12.1 billion between 2006 and July 2019.

In 2018, the Sri Lankan Government obtained a $ 1 billion syndicated loan from the China Development Bank (CDB). This loan was obtained at the USD LIBOR six-month interest rate (a global benchmark), plus a margin of 2.56% per annum and a payback period of eight years.

Sri Lanka plays a vital role in China’s “Belt and Road” (BRI) global infrastructure-building initiative and has provided billions of dollars in loans for Sri Lankan projects over the past decade. The projects include a seaport, airport, port-city, highways, and power stations. 

However, Sri Lanka is still liable to repay nearly $ 4.5 billion in annual foreign debt until 2025, and due to the increasing number of Chinese projects in Sri Lanka, critics have lambasted China’s BRI as being a “debt trap”.


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