Active Mixed AidData Chinese Aid

China Eximbank provides $989.4 million preferential buyer’s credit for Kadawatha to Meerigama Section of Central Expressway Project

¥989.4K RMB

Funder	Export-Import Bank of China (China Eximbank)
Recipient Organization	Sri Lanka Ministry of Finance
Country	Sri Lanka
Start Date	Mar 22, 2019
End Date	Mar 09, 2027
Duration	2,909 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`54590`

Grant Description

China Eximbank provides $989.4 million preferential buyer’s credit for Kadawatha to Meerigama Section of Central Expressway Project On March 22, 2019, China Eximbank and the Government of Sri Lanka signed a $989,449,000 preferential buyer’s credit (PBC) agreement [CHINA EXIMBANK PBC NO: (2018) 17 TOTAL NO.(474)] for the Kadawatha to Meerigama Section of Central Expressway Project.

The agreement was signed between the Ambassador of China to Sri Lanka Cheng Xueyuan, on behalf of China Eximbank, and Dr. R.H.S Samarathunga, Secretary to the Treasury, on behalf of the Sri Lankan Government.

📋 Loan / Grant Terms

📅 Maturity20 years

⏳ Grace Period6 years

💹 Interest Rate2.5%

The borrower was expected to use the PBC proceeds to finance 85% of the cost of a $1.164 billion commercial contract between the Government of Sri Lanka and Metallurgical Corporation of China, which it signed on August 14, 2015. China Eximbank disbursed $20,740,899.69 on February 24, 2022 and $30,828,753.09 on March 29, 2022.

The loan had achieved a 6.6% disbursement rate ($65,419,324.37 out of $989,449,000) as of December 31, 2021. The borrower made no repayments between 2019 and 2022. The loan's amount outstanding was $51,569,653 as of June 30, 2022 and $65,419,324.37 as of September 27, 2022.

The purpose of this project is to construct a 36.54 km segment of the four-lane Central Expressway that runs from Kadwatha to Merrigama (Mirigama).

This section (known as 'Section 1') is 24.4 meters in width and it commences at the interchange with Outer Circular Highway (OCH). It then passes over mainly paddy and uncultivated lands. After Gampaha, it runs mostly parallel to the existing railway line. Metallurgical Corporation of China (MCC) is the EPC contractor responsible for implementation.

A foundation laying ceremony took place on July 26, 2017.

However, the project faced major implementation delays due to the Easter bombings on April 21, 2019, the Covid-19 pandemic in 2020, and a controversy that resulted from allegations of overpricing. Construction did not commence until September 14, 2020.

The project was originally expected to reach completion within 4-years (September 14, 2024) and directly or indirectly generate 1500 jobs in Sri Lanka. However, it faced major implementation delays. On May 26, 2021, a stone crushing facility was put into operation to support the project. It reportedly required 950,000 tons of concrete gravel and 530,000 tons of concrete sand.

Then, in May 2024, a 35-meter concrete beam collapsed on the Central Expressway between Kadawatha and Meerigama (Mirigama), specifically in the Kadaoluwawa area in Bemmulla. The incident occurred within a 17 km section of the Central Expressway.

A probe was ordered to investigate why the beam collapsed and the Sri Lankan authorities determined that two additional beams were in a dangerous condition. As of October 2024, the project had only achieved a 36% completion rate.

In January 2025, the Lanka Infrastructure Development Consortium (LIDC)—comprising Access Engineering PLC, Maga Engineering (Pvt) Ltd, International Construction Consortium (Pvt) Ltd (ICC), KDA Weerasinghe & Co. (KDAW), and NEM Construction—urged President Anura Kumara Dissanayake to cancel the $1.164 billion commercial contract between the Government of Sri Lanka and Metallurgical Corporation of China, which was signed on August 14, 2015.

They argued that the contract was too expensive, and that local construction firms could complete the project cheaper and faster.

They pointed out that, under the August 14, 2015 commercial contract, the per-kilometer price of Section 1 of the Central Expressway Project was around $33 million.

However, Section 2 of Central Expressway Project was built by local construction companies for around $18 million per km.

LIDC’s letter to President Anura Kumara Dissanayake came after the Sri Lankan Cabinet approved in December 2024 the provision of nearly Rs. 7.5 billion in government funding to MCC for the completion 'critical remaining works' of Section 1 after years of delayed, and then suspended, construction activity (owing to non-disbursement of the China Eximbank loan).

There is also some evidence the China Eximbank loan for the Kadawatha to Meerigama Section of Central Expressway Project financially underperformed vis-a-vis the original expectations of the lender.

On April 12, 2022, the Government of Sri Lanka announced a ‘pre-emptive’ sovereign debt default, noting that it would suspend debt repayments to all external creditors other than multilateral institutions.

Its decision to suspend external debt service affected all China Eximbank loans with amounts outstanding at the time of the announcement.

China Eximbank did not make any additional disbursements under the PBC agreement for the Kadawatha to Meerigama Section of Central Expressway Project after April 2022.

📋 Staff Comments

This project is also known as Phase 1 and Section 1 of the Central Expressway Project and Central Expressway Project (Section 1 from Kadawatha to Mirigama). The Chinese project title is 斯里兰卡中部高速项目 or 斯里兰卡中部高速公路（CEP）项目 or 斯里兰卡中部高速公路一标段（CEP-1）项目.
Section II of the Central Expressway Project linking Mirigama to Kurunegala reportedly progressed faster and was opened on January 15, 2022. This section of road was constructed by local contractors with local funds.
On April 21, 2019, Easter Sunday, three churches in Sri Lanka and three luxury hotels in the commercial capital, Colombo, were targeted in a series of coordinated Islamist terrorist suicide bombings. Later that day, there were smaller explosions at a housing complex in Dematagoda and a guest house in Dehiwala.
The Government of Sri Lanka loan key number is 2019015.

📚 Sources & References

Sri Lanka inks agreement for single largest project loan from EXIM Bank
Overview of Central Expressway Section I
Central Expressway
Central expressway going nowhere?
China approves $1 billion loan for Sri Lanka highway - Sri Lanka PM's office
驻斯里兰卡大使程学源出席斯中部高速第一标段项目贷款协议签约仪式
程学源大使会见斯里兰卡道路与高速公路、港口与航运部长约翰斯顿·费尔南多
中国向斯里兰卡提供9.89亿美元高速公路建设贷款
Central Expressway phase 1 delayed; RDA seeks Govt. intervention to secure loan
斯里兰卡中部高速公路第一标段项目
Sri Lanka to Borrow $1 Billion from China for Highway Project
Sri Lanka seeks $1 billion loan from China amid debt woes
More loans from China : US$ 1 billion for central expressway
Sri Lanka To Borrow $1 Billion From China For Highway Project, 2019 Data on Chinese Official MLT Export and Trade-related Financing
Sri Lanka signs $1-bln loan with China to build highway
Sri Lanka signs loan agreement with China
Annual Report 2020
Annual Report 2017
Annual Report 2019
China to give USD 989 million to build new highway in Sri Lanka
Construction of Kadawatha to Meerigama section of the Central Expressway commences
Kadawatha-Mirigama Section-1 expressway construction commenced
Kadawatha-Mirigama Section of Central Expressway construction 25 percent complete
Mirigama - Kurunegala section of the Central Expressway vested with the public
Central Expressway
Feature: Chinese builders in Sri Lanka pledge patriotism on China's National Day
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Agreement signed for Single Largest project loan from the EXIM Bank of China
Central Expressway Project - Section 01 from Kadawtha to Meerigama
DRS Official Commitments from China through 2020
Agreement signed for Single Largest project loan from the EXIM Bank of China
Resource Mobilization
China leads Sri Lanka’s new debt in 2019 with US$990mn expressway loan
Economic and Social Infrastructure
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Ranil Awarding Expressway Contract To Controversial MCC Raises Questions
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Chinese Ambassador to Sri Lanka
Inspecting Projects in Sri Lanka, and Visiting Workers at the Production Line of Project Departments
中国中冶签约承建的斯里兰卡中部高速公路第一标段项目正式开工
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FINANCIAL STATEMENTS OF THE GOVERNMENT FOR THE YEAR ENDED 31ST DECEMBER 2021
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Central Expressway: Lanka builders urge President to revoke deal with China’s MCC
Pillar collapse in Sri Lanka raises concerns about quality of BRI projects
Abandoned expressway site poses livelihood problems for villagers
RDA probes Central Expressway beam collapse mystery
Half-built Kadawatha to Mirigama expressway landfill worsens flooding
Sri Lanka in talks to slash damages owed to Chinese expressway contractor: President Loan applications and disbursements are still being received and processed as the projects continue to evolve. Ongoing monitoring and evaluation are in place to ensure project continuity.

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Sri Lanka Ministry of Finance

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