Rail Loan

July 23, 2008 (LBO) - Sri Lanka has inked a deal with India's Export-Import Bank of India to borrow 100 million US dollars to upgrade a coastal rail track and buy rolling stock, the island's finance ministry said. A credit agreement for 100 million US dollars was signed between finance ministry secretary P B Jayasundera and Exim Bank chairman and managing director T C Venkat Subramanian Tuesday.

The money will be used to upgrade the rail track between Colombo and the southern coastal town on Matara which is expected to increase the average train speed on the track to 80 kilometres an hour from the current 40 kilometres.

The track was damaged during the December 2004 tsunami. The money will also buy 16 diesel multiple units (DMUs), three locomotives and spares, the finance ministry said.

India is expected to provide a further 67.4 million dollars in the second phase of the project. Total project cost is estimated at 212.4 million US dollars with Sri Lanka chipping in with 45 million US dollars.

The Exim bank money comes at London Interbank Offered Rate (LIBOR) + 0.5 percent premium per year. A commitment fee of 0.5 percent would be charged on unutilized credit, authorities said earlier.

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