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Australia, Singapore lend CPC a helping hand

08 Aug 2021

  • Submit proposals to extend credit to debt-ridden CPC
By Yakuta Dawood  With the Ceylon Petroleum Corporation’s (CPC) recent requests from the Bank of Japan and State Bank of China to obtain loans at a lower interest rate receiving unfavourable responses, the CPC has now received offers for loans from Singapore, Australia, and other lenders in China, The Sunday Morning Business learns.  The CPC is desperately looking for credit lines from bilateral lenders to settle the debt it owes to two leading state banks – Bank of Ceylon (BOC) and People’s Bank.  Speaking to us, CPC Deputy General Manager of Finance Varuna Nilanga Weerasooriya stated that the CPC is currently evaluating a total of 21 proposals submitted from countries such as China, Australia, Singapore, and others, after which a report will be submitted to the Cabinet.  “After analysing the proposals, the final report will be submitted to the Cabinet in the coming week or two,” Weerasooriya said.  We also spoke to CPC Chairman Sumith Wijesinghe, who also confirmed that the CPC is in the evaluation stage, after having received potential applications from different countries over a period of two weeks. With the CPC owing colossal sums to two major state banks at high interest rates, the Sri Lankan authorities recently requested credit from Japan and China at a comparatively lower interest rate to pay back the money the loss-making state institution owes the banks. However, in June, Minister of Energy Udaya Gammanpila, speaking to us, stated that after evaluating Sri Lanka’s loan request, both the international banks refused to grant the loan of  $ 1 billion at an interest rate lower than the existing rate of 5.5%. “We are in debt to BOC and People’s Bank. Therefore, we asked the Chinese and Japanese Ambassadors if they could provide loans to replace the existing loans with a lower interest rate. However, after the calculation and evaluation, they said they can’t lower the interest rate,” Gammanpila said at the time. Commenting further, he said that the Cabinet-appointed committee, composed of Energy Ministry Secretary K.D.R. Olga, Treasury Deputy Secretary Saman Fernando, and CPC Managing Director Buddhika Ruwan Madihahewa, would study the existing proposal in depth and come to a decision on whether to acquire a $ 1 billion loan at the interest rate offered by these two lenders to repay the state banks of Sri Lanka. “The committee will discuss the matter, and if approved, will move forward and obtain a loan from Japan and China. We will try our best to get $ 1 billion by the end of 2021 with a grace period of one year and a repayment period of 10 years in equal monthly instalments,” he explained at the time.  Responding to a recent outburst by the Opposition regarding this issue, Gammanpila stated: “People are commenting without studying what we are trying to do. The Central Bank of Sri Lanka (CBSL) has an intelligence unit to which we have to provide the information about the lender; hence, if we are getting a loan from money laundering persons/institutions, it will not be approved by the CBSL, as Sri Lanka has strict money laundering laws and regulations.” Speaking to The Sunday Morning Business in February, Weerasooriya emphasised that the CPC’s problem would be solved if it could convert its dollar loans into rupee loans. According to the Finance Ministry’s statistics, the CPC’s total debt due to state-run People’s Bank and BOC had reached Rs. 592.7 billion by end-April 2020, in comparison to Rs. 566 billion in December 2019. However, to overcome the debt situation CPC is facing right now, several discussions are also being held with the Ceylon Electricity Board (CEB) and the national carrier SriLankan Airlines, to repay the large sums both institutions owe in outstanding debt to the CPC.


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