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Road development: Local banks lend a staggering Rs. 239 billion for projects
In the past six years, local banks have lent a staggering Rs 239.1 billion to the Government for road development projects, says the 2018 annual performance report of Ministry of Highways and Road Development.
The amount borrowed is Rs. 239,125.38 million between 2011 and the end of last year, with the National Savings Bank (NSB) having granted the heftiest loan facilities followed by the Bank of Ceylon (BOC), according to the report presented in Parliament this week.
While State banks have dug deepest into their pockets, the private sector has also dished out loans to the road sector.
The loans from local banks are backed by a general Treasury guarantee. These finances were resorted to when there were no foreign donors forthcoming for certain projects, the report said. In other cases, local bank loans were taken to meet financing shortages, especially for land acquisition and other components usually funded by the Government.
The Road Development Authority (RDA) first borrowed in this manner in 2011, under the ‘64 Local Bank Funded Project’.
Since then, more than 10 projects have been financed through local banks.
Last year alone, Rs 33.5bn worth of loans were taken from the BoC for the Central Expressway I, II and III, ‘miscellaneous foreign funded projects’, road widening and improvement, land division and compensation. But the total amount borrowed from local banks for just the three sections of the Central Expressway is a whopping Rs 60 billion.
Thirty-one percent of the total loan quantity has been met by the NSB, with the BOC at a close 30 percent and the People’s Bank at 12 percent. The HNB took the lead among private sector banks, meeting 12 percent of the total borrowed, while Sampath Bank met 6 percent. Commercial Bank and the NDB lent three percent each. The DFCC is last on the list with one percent.
Sri Lanka embarked on an ambitious road-development drive after the end of the war but questions remain on the returns on investment, especially against the steep cost of these projects.
“Though the government has already invested considerably in developing the road network, which included a significant portion of funding coming from debt related sources, to improve regional connectivity, this investment drive has not been able to fully realise envisaged regional economic expansion,” the Central Bank’s 2018 Annual Report states.
“This highlights the need to prioritise development projects in those areas to get the maximum benefit of these investments.”
The highest road length of ‘A’ class highways (734.49km) is located in Northern Province and the second highest in the Eastern Province (734.49km).