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Treasury to begin talks with JICA to revoke light-rail loan deal
The Treasury will start talks with Japan International Cooperation Agency (JICA) with a view to cancelling the loan agreement to build the Colombo light rail transit system (LRT), an authoritative official source said this week.
The Government’s priorities have shifted from mega projects to micro-level initiatives such as irrigation, agriculture, the 100,000km road project and 150,000 household water connections, he said.
“Since the JICA agreement is an official loan contract, we have to start negotiations and cancel it,” he continued. “That is the process.”
A cabinet committee that is reviewing projects is yet to present its report. However, various Government sources indicated from earlier this year that the JICA-backed LRT was off. They also said the project was likely to be a public-private partnership (PPP) rather than loan-funded.
This prompted JICA to urge the Sri Lanka Government in writing to follow “due process” if it intended to shift from Japanese funding to a PPP.
In a strongly worded letter to the Treasury Secretary in June this year, JICA’s Sri Lanka Representative Fusato Tanaka expressed “great shock” at hearing that “the current Government has decided not to obtain JICA loans and instead to implement the project as a Public Private Partnership, and that necessary action would be taken to select a private investor”.
“We have not received so far any official communication in writing for a consultation regarding the review of the content of this project from the Government of Sri Lanka, nor have we agreed with any modification or cancellation on the loan agreement or any of its associated documents,” he said.
JICA also reminded the Treasury Secretary that the project was formulated through extensive studies by international and local consultants spanning several years based on the official request of the Sri Lanka Government. The Agency “has made every effort to formulate the project and loan terms and conditions to maximise benefit to the people of Sri Lanka”.
In March last year, JICA signed a loan agreement with the Sri Lanka Government to provide an official development assistance (ODA) loan to introduce an LRT system with 16 stations distributed over 15.7 kilometres of track in and around Colombo. The project would use Japanese technology including rolling stock and electromechanical equipment. Completion was due in April 2026. The loan has a 12-year grace period and the interest rate is 0.1 percent.