CPC to borrow $ 1 billion from the United States

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Funds will be released by DecemberThe loan has an interest rate of 3%The money will be used to pay off the debts of state banks

By Yakuta Dawood

U.S. lender is set to lend $ 1 billion to debt-ridden Sri Lankan state oil company Ceylon Petroleum Corporation (CPC) to help repay colossal amounts of debt the company owes state banks , Sunday morning business learn exclusively.

The loan is expected to be received by the end of this year at an interest rate of 3% per annum.

The decision to seek an international lender who would lend money at a lower interest rate to partially save CPC from its debt to state banks was motivated by the fact that the entity must pay higher interest at the Bank of Ceylan (BOC) and the Banque Populaire. for the money he owes these banks.

Speaking to us, CPC Deputy Director General of Finance Varuna Nilanga Weerasooriya said that after the Cabinet of Ministers assessed all the loan offers it had received, it authorized the obtaining of loans. one billion United States dollars at an interest rate of 3%.

The Sri Lankan authorities initially applied for credit from the Bank of Japan and the State Bank of China at a comparatively lower interest rate. However, speaking to us in June, Energy Minister Udaya Gammanpila said that after assessing Sri Lanka’s loan application, the two international banks said that the international banks were refusing to grant the loan from Sri Lanka. $ 1 billion at an interest rate lower than the current rate of 5.5%.

“We are indebted to BOC and the Banque Populaire. 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 valuation, they said they couldn’t lower the interest rate, ”Gammanpila said at the time.

Commenting further, he said the Cabinet-appointed committee, which includes Energy Ministry Secretary KDR Olga, Deputy Treasury Secretary Saman Fernando and CPC Director General Buddhika Ruwan Madihahewa, will study the existing proposal in depth and would make a decision on whether to acquire a $ 1 billion loan at the interest rate offered by these two lenders.

However, later it was reported that CPC had received loan offers from several other countries including Australia, Singapore and China.

Speaking to us, CPC Chairman Sumith Wijesinghe said officials are currently negotiating and are working on releasing the Letter of Intent (LOI). Subsequently, when asked when the $ 1 billion loan would be received, he said he would hopefully be received within that year.

All attempts to reach Energy Minister Gammanpila for further information were unsuccessful.

Meanwhile, the president of the Petroleum Corporation National Employees Union, Samika Asithanja, last Monday (13) objected to the move and said that as a union he did not think he was ideal that the government allegedly waives the Minister of Finance and Treasury to obtain such a loan.

“So far, we have not been informed of obtaining loans or contracts from foreign countries. We assume that they are attempting to amend the CPC Act in order to meet a requirement of this agreement, ”he alleged.

Weerasooriya pointed out in February that the CPC’s debt problem would be solved if it could convert its dollar loans into rupee loans. According to statistics from the Ministry of Finance, CPC’s total debt owed to the state-run Banque Populaire and BOC had reached Rs. 592.7 billion by the end of April 2020, compared to Rs. 566 billion in December 2019.

However, to overcome the debt situation that CPC is currently facing, several discussions are underway with the Ceylon Electricity Board (CEB) and SriLankan Airlines to repay the large sums that these two institutions owe the CPC.

Commenting on this, Weerasooriya said, “SriLankan Airlines has had an unpaid payment from April 2020 (after the Easter Sunday bombings) to date, and since March of last year the CEB has only paid marginal figures; they don’t pay at all. Some power plants are also awaiting payment from the CEB. “

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