Hambantota Port’s Rs. 179 bn debt falls into black hole
A high level investigation is to get underway into missing money amounting to billions of rupees from the massive Chinese loan obtained for the construction work of the Hambantota harbour, official sources said.
Out of the foreign loan obtained for the construction of the harbour, the loan balance amounting to Rs.179.55 billion credited in the accounts of the Sri Lanka Ports Authority (SLPA) had been removed from the financial statements of the Authority, a government audit query exposed.
This removal of the book entry was done on November 30, 2017 without the concurrence of the Treasury and without seeking approval of the cabinet of ministers. Under this circumstance, this loan balance money had not been credited in any government account.
According to the records of the Department of External Resources of the Treasury that loan balance was Rs.179.55 billion as at 31 December 2018.
However, two parties, the Treasury and the SLPA have not come to a concurrence in connection with accounting of this loan even as at the end of the year 2018 under review.
A sum of Rs.31.54 billion was the foreign conversion exchange loss calculated as at November 30, 2017 with relevance to this loan which had been removed from the accounts of the SLPA.
The cabinet of ministers has decided on July 20, 2017 that the Treasury had taken responsibility to make payments on the Hambantota Port loans. But the debt had not been included in the financial statements of the government.
This discrepancy has become a mystery at present prompting the authorities to initiate an immediate inquiry into the missing money of the Chinese loan, a senior Treasury official said.
When a discrepancy occurs in an account that cannot be traced, it is usual to make what is called an un-documentable adjustment, or journal voucher, he said adding that this was not done so far.
According to the Finance Ministry data, the Hambantota Port project has a total loan of US$ 1.35 billion. Out of that, $900 million was drawn at a 2 per cent interest rate and the remainder is with an interest rate ranging from 6.3 to 7.65 percent.
EXIM Bank of China provided the loan of $307 million for the construction of the bunkering port in the southern part of the country. China EXIM Bank and Sri Lanka signed the 15-year loan agreement of Hambantota Port Phase I in October 2007.
The Hambantota Port was constructed by the Chinese companies China Harbour Engineering Company and Sinohydro Corporation; construction began on January 15, 2008.
While Phase 1 of the project cost was around $505 million, the EXIM Bank had also provided about $77 million loan for the bunkering terminal and $809.35 million for Hambantota Port Development Project Phase II.
To remove this massive debt burden, the government leased Hambantota port, to China Merchant Port Holdings Ltd (CM Port) for 99 years for $1.12 billion in 2017.
This project is largely the reason why Sri Lanka is widely cited as a clear example of getting trapped in Chinese debt and being forced to hand over assets with national and strategic importance to China.