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by Ravi Ladduwahetty

The European Investment Bank (EIB) will provide a credit line to the value of 40 million Euros (Rs. 3899 million) to develop private sector projects in Sri Lanka. The projects include industrial, agro-industrial, productive infrastructure, mineral/ mineral processing, tourism and related services in the economy.

The Credit Agreement received the approval of the Cabinet of Ministers at its meeting last Thursday. President of the European Investment Bank Philippe Maystadt and Finance Minister K.N. Choksy will sign the Agreement in Colombo on December 23.

The loan facility will be channelled through the DFCC Bank. The proceeds of the credit facility will be used to finance small and medium sized projects.

The terms and conditions of this credit facility entails its availability in tranches with each tranche being 5 million Euros unless specifically agreed by the EIB. The currency of disbursement will be in Euro, United States Dollars, Sterling Pounds or Japanese Yen. The maturity date will be fifteen years from the date of each disbursement.

The Government has three options of borrowing in either fixed, floating or on an interest-rate basis. It has to be stipulated in the Request For Disbursement of each tranche.

The Fixed Rate Tranches will be on the basis of the EIB's actual potential cost of borrowing from international capital markets plus a small intermediation margin. The current fixed interest rate for Euro is 5.19 percent and for US$ 5.24 percent for loans with semi-annual payments and maturity of 15 years.

The floating rate tranche will be based on LIBOR (London Inter-bank Offer Rate) for three months deposit plus an annual rate of 0.40 percent for tranches in United States Dollars and in the case of Euro, EURIBOR for three months deposits plus an annual rate of 0.40 percent.

The repayment will be on semi-annual consecutive instalments commencing from four years from the disbursement of each tranche. The draw down period will be upto three to five years from the date of signing of the Agreement. The conditions of the loan are that no commitment, front-end or loan administration is payable.

The Government will lend the proceeds of the loan to the DFCC Bank on the following terms:

(a) Euro 25 million equivalent in Rupees at three months Average Weighted Deposit Rate (AWDR) and repayment in thirteen years with a grace period of four years.

(b) Euro 15 million equivalent dominated in foreign currency to be repaid by the DFCC at the prevailing exchange rate at the date of repayment plus 0.25 basis points and repayment in 15 years with a grace period of four years.

OPEC Funds for road improvements

Meanwhile, the OPEC Governing Board, during its recently concluded sessions, has approved a loan of US$ 8.50 million in support of road development projects which will also be co-financed by the Asian Development Bank. The loan will bear an annual interest rate of 2.5 percent with a 1 percent service charge on amounts withdrawn and outstanding and will have 20 years maturity, including a five-year grace period. The loan will be administered by the Asian Development Bank.

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