Sri Lanka compelled to pay massive penalties for terminating JICA funded LRT 

Under the contract agreement, if the Light Rail Transit (LRT) project is suspended or delayed due to renegotiation, the Government will incur a loss of around USD 100 million, in addition to penalties from the Japan International Cooperation Agency.

The treasury, on the advice of Presidential Secretary Dr. P.B. Jayasundera, has informed JICA it could not proceed with the LRT for the next five years because it did not have borrowing space.
 
It is not clear how the JICA project would affect the Government’s financial situation as the project contract includes a 12-year grace period for the commencement of loan repayment.

The USD 270 million JICA loan for the project is provided under Special Terms for Economic Partnership, carrying interest rates of 0.1% per annum for civil works and equipment cost.

It has offered 0.01% p.a. for engineering services cost with a 40-year repayment period including a 12-year grace period, in order to promote technology transfer and economic cooperation between Sri Lanka and Japan.

The LRT project was expected to boost transportation capacity, save travel time, and improve the safety and comfort of public transportation over 15.7 kilometres of track with 16 stations in and around Colombo.

The Sri Lanka government has already spent a sum of around LKR 3 billion from the loan facility for the project obtained under the loan agreement signed on 11 March 2019.
 
State Minister Nalaka Godahewa noted that the government has to pay a penalty for the termination of the project which will amount to twice the total cost incurred to build the Hambantota port.