The Hon. (Dr.) Harsha de Silva

¶ 01 Hon. Deputy Chairperson of Committees, the Hon. Deputy Minister who spoke before me mentioned a “curse.” If one opens their eyes, they will see that is not a fair characterization. Sri Lanka is not a failed, destitute country; there has been economic growth. In 2019, Sri Lanka was upper middle-income; only in 2020 did we slip to lower middle-income. The World Bank’s latest report shows that had we stayed on the 2020 trajectory, today—given this Government’s actions—poverty is 67.5%. Many bear responsibility for that “curse.” To achieve growth, reforms are essential; those who blocked reforms should look in the mirror.

¶ 02 I wish to address the interest terms of the Exim Bank of China loan for the Central Expressway. After bankruptcy, we passed the 2024 No. 33 Public Debt Management Act. Henceforth, borrowing must comply. This US$500 million loan is the first major one post-restructuring and must follow the Act. Section 8 requires establishing a Public Debt Coordination Committee (PDCC) which must meet monthly and report on such borrowing. I ask the Finance Minister: has the PDCC been formed and has it reported on this loan?

¶ 03 Section 21 on supplier’s credit requires the Office to assess the cost and send recommendations to the Minister prior to agreement. The prior loan carried a fixed 2.5% interest. The PDCC recommendation states the originally agreed fixed 2.5% should be retained. It further states that the proposed variable structure with a 2.5% floor and 3.5% cap is asymmetrical: beneficial to the lender when rates fall because the borrower cannot benefit below 2.5%. Thus, even if the Loan Prime Rate (LPR) drops below 2.5%, the borrower still pays 2.5%. This asymmetry disadvantages Sri Lanka. The recommendation proposes a symmetric band—e.g., 1.5% above or below a mid-point—so both sides share upside and downside.

¶ 04 This recommendation was not accepted. The Government team claims the Chinese side would not agree to a fixed rate, only floating. The issue with floating here is as follows: the 5-year LPR in 2020 was 4.80%; it has since fallen to 3.5%, with forecasts around 3.38% next year. The negotiated formula is LPR minus 0.8%. At 3.5%, that is 2.7%; if LPR falls to 3.38%, that is 2.58%. But due to the 2.5% floor, Sri Lanka gains no benefit below 2.5%—we are stuck. Proper negotiation would have set a symmetric band around the going rate—for example, around 2.7% with equal movement up or down—so we share benefits when rates fall. That did not happen.

¶ 05 No matter what is said, debts agreed today will bind future governments. We may be in Opposition now, but we will have to repay. Please negotiate responsibly within the Public Debt Management Act and in Sri Lanka’s best interest.

¶ 06 I table the PDCC recommendation and the Chinese bank documents.