Twenty foreign companies, including those from China, the United States (U.S.), and Japan, have expressed interest in investing in the expansion of Sri Lanka’s Sapugaskanda oil refinery, an official said yesterday.

The Ceylon Petroleum Corporation (CPC) recently called for Expressions of Interest (EOIs) from potential investors to expand the facility. The deadline for submissions closed last Friday.

CPC Chairman D.A. Rajakaruna told Daily Mirror that 20 firms from leading countries in the world had applied.

“There are companies from countries such as the U.S., China, Japan, and the United Arab Emirates (UAE) in the list. We are yet to begin evaluation,” he said.

The Sapugaskanda refinery has been a critical asset in Sri Lanka’s energy security for decades, and the expansion plans were considered earlier, followed by feasibility studies in 2010 and 2022, but several challenges delayed progress.

Civil war, the pandemic, economic crises, and political instability prevented any investment.

“With stability improving and regional energy demand growing, now is the most suitable time to re-initiate the project and ensure its long-term success,” he said.

“CPC and the government can manage incremental modifications and maintain profitability,” he said.

This is Sri Lanka’s largest and only petroleum refining business, owned by the government, with a guaranteed local demand and strong potential for expansion into bunkering, jet fuel, lubricants, and chemical markets. The government expects healthy, value-adding proposals that go beyond typical investment models, he said.

The state aims to retain a significant stake, ensuring long-term national benefit while allowing investors to secure competitive advantages. Investors should propose partnership models where the government benefits not just proportionally, but strategically, he said.

Besides, with expansion, Sri Lanka plans to increase its refinery capacity from 50,000 barrels a day to 100,000 barrels a day.

Source:Daily Mirror.lk

The $ 500 million loan from China’s Export-Import (Exim) Bank for Section 1 of the Central Expressway Project (CEP-1) is under review by the Committee on Public Finance (COPF), even though the Cabinet has already approved the project.

Deputy Secretary to the Treasury Ajith Abeysekera told The Sunday Morning that the final decision would consider both Cabinet approval and COPF recommendations.

Abeysekera stated: “The entire debt finalisation process is guided by the COPF as a standard procedure. While the Cabinet has already given its approval for the project to proceed, the final decision must reflect both the Cabinet’s considerations and the COPF’s recommendations.”

The $ 500 million loan from China Exim Bank for CEP-1 has become the focus of intense negotiations, as the COPF seeks better terms while the Government moves forward with the project under initial approvals.

Abeysekera’s comment hinted at the position that the Government may consider the proposals of the COPF prior to proceeding to renegotiate the terms.

COPF Chairman Dr. Harsha de Silva, speaking to The Sunday Morning, voiced strong reservations about the proposed changes to the interest rate, describing the new structure as unfavourable to Sri Lanka.

He said: “The proposed loan terms have shifted from a fixed interest rate of 2.5% to a floating rate capped at 3.5%. My main concern is the floor for the floating rate, which is currently set at the present rate.”

Dr. de Silva added: “For a floating rate to be fair and mutually beneficial, the range should be more balanced. The acceptable range should be 1.5–3.5% rather than 2.5–3.5%, so that Sri Lanka can benefit if market interest rates fall.”

“We questioned whether the terms had already been finalised and they responded negatively, so we still have time. The Government should consider renegotiating these terms to make it fair.”

He also emphasised: “As the first major facility under the new Public Debt Management Act, the loan must strictly follow Treasury advice. According to this act, only the Treasury can apply for a public debt, so the Treasury must take strong responsibility to negotiate in the best interests of the country.”

He noted that the Treasury itself had provided three options for managing the revised rate structure, highlighting the importance of careful adherence to the law.

On the timing of renegotiations, Abeysekera clarified: “We have not received the COPF’s formal written recommendation yet. We are waiting for that, so I am not in a position to comment yet.”

Road Development Authority Chairman T. Paskaran explained the role of his organisation, stating: “The RDA does not negotiate the terms of the loan agreement. That is the role of the Treasury. We are only concerned with the civil matters related to the road development work, which have already been settled. The loan negotiation aspect of it is the role of the Treasury”

Deputy Minister of Economic Development Prof. Anil Jayantha Fernando, Treasury Secretary Dr. Harshana Suriyapperuma, and Deputy Minister of Transport and Highways Dr. Prasanna Gunasena were unavailable for comment.

Chinese Ambassador to Sri Lanka Qi Zhenhong has reaffirmed their enduring friendship with Sri Lanka, highlighting strong bilateral cooperation in development projects, public welfare initiatives, and crisis response.

The two countries have stood together through challenges such as the Covid-19 pandemic, economic crises, kidney disease, and flood relief efforts, Ambassador Qi Zhenhong said.

Ambassador Qi made these remarks in a statement of commemorating the 76th anniversary of the founding of the People’s Republic of China. He noted that earlier this year, President Anura Kumara Dissanayake’s visit to China resulted in significant understandings with President Xi Jinping, including jointly building a China-Sri Lanka community with a shared future and elevating bilateral relations to a new level.

Ambassador Qi highlighted that cooperation between the two countries spans major infrastructure and livelihood projects from the Colombo Port City and Hambantota Port improvements to the Central Expressway Project, integrated water supply schemes, school donations, free cataract surgeries, and refurbishment of public institutions.

“Our bilateral exchanges are multi-faceted. From daily people-to-people engagement to frequent high-level visits on state governance, from the new progress of the Colombo port city to the improved performance of the Hambantota port, from the full resumption of the Central Expressway Project Section one to the Gampaha, Attanagalla, and Minuwangoda Integrated Water Supply Scheme, from the donation of stationery and fabric for school uniforms to the free cataract surgeries, and from the Out-Patient Department building of the Sri Lankan National Hospital to the refurbishment of the Superior Courts Complex, among many others, these vivid examples of both major and livelihood projects showcase the all-round advancement of our bilateral relations,” he said.

He concluded his statement with a message of goodwill: “We wish China and Sri Lanka greater prosperity and everlasting friendship.”

The Asian Development Bank (ADB) said yesterday that growth in Sri Lanka will be held back in 2026 by new US tariffs on key exports, even as momentum remains intact this year.

“These developments will likely tamp down the impact on the economy this year from a 20% tariff imposed on Sri Lankan exports to the US, mostly garments and rubber. But the tariffs will be more of a headwind, holding back external sector performance and consumption in 2026 because of possible job losses, both directly and indirectly,” the ADB said in its latest report released yesterday titled ‘Asian Development Outlook: Growth Slows as New Global Trade Environment Takes Shape’.

It said that US tariffs have soared to historic heights amid continued elevated trade policy uncertainty. Though generally lower than announced on 2 April, the additional tariffs that took effect in August are historically high. From 2.4% in 2024, the average effective US tariff rate has surged to 17.4%, the highest since the Great Depression of the 1930s.

Trade policy uncertainty remains at very high levels, despite easing from April’s peak, the ADB said.

“Uncertainty is fuelled by announcements of several bilateral US trade agreements without finalised terms, the prospect of new US sectoral tariffs on pharmaceuticals and semiconductors, and possible revisions to tariffs already in place”.

For Sri Lanka, ADB said growth in 2025 is forecast to remain unchanged at 3.9%, supported by manufacturing, construction and services, after the economy expanded by 4.8% year on year in the first quarter. It forecasts growth to slow down to about 3.3% in 2026.

Industrial production rose 5.1% in the first half, approaching pre-crisis levels, while private credit grew 19.6% in July, driven by vehicle imports, low interest rates and a favourable business outlook.

Inflation returned in August after months of deflation, though price pressures remain subdued. Headline inflation fell 1.7% year on year in the first eight months of 2025, compared with a 0.5% increase a year earlier, as transport and energy costs declined.

The Central Bank cut its policy rate by 25 basis points in May and held it at 7.75% in July. Average inflation for 2025 has been revised down significantly to O.5% while the 2026 forecast is unchanged at 4.5% on expectations of gradually rising food and energy prices.

The current account surplus grew by 30.2% in the first half of 2025 on the back of strong remittances and steady tourism earnings. Imports rose 12.4% during the period, reflecting a surge in vehicle imports, while exports grew 5.7%.

Workers’ remittances rose 19.3% and tourism earnings increased 8.4%. Gross official reserves stood at $ 6.2 billion at end-August, covering 3.7 months of imports, only slightly higher than December 2024, as debt service payments resumed.

The IMF completed Sri Lanka’s fourth Extended Fund Facility review in July, with disbursements totalling $ 1.74 billion so far. Debt restructuring moved forward with agreements reached with France, India, Hungary, Japan, Saudi Arabia and the United Kingdom in 2025.

The ADB said risks remain elevated. These include a stronger-than-expected impact from the US tariffs, volatility in the Middle East affecting remittances, swings in energy prices, and a potential global slowdown that could weaken tourism and external demand. Domestically, weather-related disruptions could weigh on agriculture and food prices.

In August, economic think tank Institute of Policy (IPS) warned that the 20% reciprocal tariff unilaterally imposed by the Trump administration could lead to export losses of $ 634 million and put nearly 16,000 jobs at risk, mostly female workers in the apparel industry.

With a quarter of Sri Lanka’s total exports facing at least a 20-percentage-point increase in tariffs, the trade-weighted effective tariff rate will be 29.9%, compared to 10.20% in April 2025. Sri Lanka’s main exports to the US, apparel and rubber products, will face effective tariff rates of 36.8% and 20.2%, respectively, it said.

Institutional corruption persists, particularly within sectors protected by entrenched vested interests, even under the current government, though high-level political bribery solicitation appears to have diminished, according to the U.S. statement on Sri Lanka’s investment climate.

The report, released recently, said endemic corruption and a lack of transparency in public procurement have historically inflicted significant economic losses on Sri Lanka, and these factors deter foreign direct investment, particularly in large infrastructure sectors where top global companies often remain absent.

The statement on Sri Lanka says that despite legal prohibitions, practices such as accepting unsolicited project proposals and tailoring tender specifications to favour specific companies reportedly remain common.

The government strengthened its anti-corruption framework by passing comprehensive legislation in July 2023 aimed at enhancing enforcement capabilities.

The President has publicly committed to eradicating corruption and enhancing governmental transparency. Provisions addressing conflicts of interest remain vague, and enforcement mechanisms are ineffective.

Listed companies generally have codes of conduct to prohibit bribery of public officials. However, privately owned companies – especially those involved in infrastructure projects and imports – do not generally adhere to these guidelines. Sri Lanka is a party to the United Nations Convention Against Corruption (UNCAC), according to the report.