October 05, Colombo (LNW): Dr Harsha de Silva, Chair of the Committee on Public Finance (CoPF), has raised alarm over a proposal to amend the financing terms of the Central Expressway project, warning that such a move could ultimately inflate Sri Lanka’s external borrowing costs.
Posting on X (formerly Twitter), Dr de Silva drew attention to what he described as troubling developments surrounding the LKR 226 billion infrastructure initiative, which has already faced repeated delays and mounting financial burdens due to accruing interest and stalled negotiations.
Despite the project’s recent relaunch under the administration of President Anura Kumara Dissanayake, Dr de Silva noted that critical financial arrangements remain unresolved. In particular, discussions between the government and China EXIM Bank over a revised USD 500 million loan, as well as ongoing contractual disputes with the project’s primary contractor, MCC, have yet to reach final agreement.
Of particular concern to the CoPF, Dr de Silva said, is a proposal by the Ministry of Highways to transition the loan’s existing 15-year fixed interest rate of 2.5% to a floating structure. The proposed new arrangement would introduce a variable rate, with a minimum of 2.5% and a ceiling of 3.5%, depending on changes in Chinese sovereign lending rates over time.
This shift from a fixed to a variable rate raises serious questions, he said, warning that Sri Lanka may end up exposed to higher repayment obligations if global or Chinese interest rates rise significantly in the coming years.
The CoPF has formally advised the Ministry to pursue a more balanced approach—one that would ensure parity for both sides in the event of future fluctuations in borrowing costs. The committee is seeking reassurance that any revised agreement will preserve the country’s long-term fiscal interests while safeguarding against avoidable risk exposure.
