Govt. Increases budget by LKR 53bn for roads and bridges
The Ministry of Highways is reportedly seeking parliamentary approval to spend an additional LKR 53 billion (0.4% of the country’s GDP) to construct a bridge and several roads this year.
The construction will mainly be financed by China, the Asian Development Bank (ADB) and the Japan International Co-operation Agency (JICA), and is not expected to expand domestic borrowings, with the Treasury contributing only LKR 2.5 billion of the cost.
LKR 30 billion in funds has been obtained through a Chinese loan for the construction of expressways totalling LKR 31.2 billion, with the balance LKR 1.2 billion coming from domestic sources.
LKR 29 billion, which had been set aside under the 2017 Budget, for the Southern Expressway, was paid in July to settle the contactor, with funds for the outer circular road having also been run through during the same month.
With the total 2017 budgetary allocation having been spent in July to settle contractors, the ministry has sought LKR 1.3 billion in domestic funding for the LKR 15.8 billion worth national and provincial road projects funded by the ADB and China.
LKR 6 billion is also needed to settle a contractor in order to commence work on the JICA funded new bridge to be constructed across the Kelani River, and failure to settle the payment will result in the government having to pay an additional 5% penalty for late payment.
In 2017 the ministry had claimed it required LKR 300 billion to spend on projects, but had been allocated only LKR 116 billion under the budget, of which LKR 104 billion had been spent by July.
With 4.6% of estimated GDP amounting to LKR 625 billion totalling the country’s 2017 budget deficit, LKR 332 billion had been sourced through foreign financing.
This additional LKR 53 billion the ministry is seeking is approximately 0.4% of the GDP and is almost exclusively financed by foreign borrowings. Though Sri Lanka’s interest rates are affected only by domestic borrowing, it is unclear if the budget deficit target will increase by a further 0.4%.
OSL TAKE:
With the government moving towards expanding on infrastructure projects and increasing its budgetary allocations for the same, Sri Lanka is continuing on its infrastructure expansion trajectory. This in turn will create new opportunities for potential investors who may wish to partner such projects at various levels.
| Article Code : | VBS/AT/25082017/Z_2 |