Bank issues high insurance premium on loan for government project

Country turns to a private lender after failed attempts with international finance institutions

Bank issues high insurance premium on loan for government project

Insurance News

By Paolo Taruc

A Japanese bank has reportedly charged the Sri Lanka Government with a large premium on the construction of a 32km expressway between two towns in the central part of the country.

According to the Sunday Times, the government was levied Rs 14 billion (about US$90.6 million), for a loan of Rs 138 billion (about US$89.29 billion) from Bank of Tokyo-Mitubishi UFJ.  Priyantha Ratnanayake, director general of the external resources department under the Ministry of National Policy and Economic Affairs, told the broadsheet that the high premium was determined following a review of the country’s repayment capacity, current status of foreign debt, and its current economic stability

The government official said they considered the loan from the Japanese bank, after attempts at obtaining loans from the Asian Development Bank, the World Bank and the Japan International Co-operation Agency had failed. Because of the high premium, they may have to divide the project into several phases, the paper added.

The loan is scheduled to be rapaid in 15 years, with a grace period of six months. The paper said government officials plan to obtain the loan by April, and the issue of the high premium is still under negotiations.

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