Ceylon - Highway Project

CRCULATING COPY RESTRICTED TO BE RETURNED TO REPORTS DESK Report No. P-643 IN GENERAL FILES This report was prepared for use within the Bank and its offiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN AND A PROPOSED DEVELOPMtNT CREDIT TO THE GOVERNMENT OF CEYLON FOR A HIGHWAY PROJECT October 1, 1968  INTERNAiTIONAL BAN( FOR RECONSTRUCTION AND DEVELOPNENT INTERNATIONAL DETELOPIUT ASSOCIATION PRESIDENT'S REPORT ANID RECOiNDA-zETION TO THE EKECUTIVE DIRECTORS ONM A PROPOSED LOAN AND A PROPOSED CREDIT TO THE GOVERNMENT OF CEYLON FOR A HIGHWAY PROJECT 1. I submit the following report and recommendation on a proposed loan from the Bank in an amount in various currencies equivalent to US$4.9 million and on a proposed credit from the Association in an amount in various currencies equivalent to US$4.9 million, both to the Government of Ceylon for a highway project. PART I - HISTORICAL 2. In June 1967 the Bank made a Technical Assistance Grant to Ceylon to finance a highway study. In addition to drawing up a highway master plan, and providing recommendations on the organization of highway activities, the consultants were asked to identify a first-stage project consisting of the provision of road rehabilitation and maintenance equipment and of workshop equipment, the reconstruction of unsafe bridges, feasibility studies and detailed engineering for high priority highways and management and advisory services. The project was submitted by the Government to the Association in February 1968 and appraised in March. 3. The proposed credit was expected to be signed after the replenishment of IDA. lThen it became clear in early September that replen- ishment would be delayed, the Government accepted a proposal whereby half the financing would come from IDA out of existing resources and half from the Bank on extended terms. Negotiations were held in Washington between September 16 and September 20. The Government team was led by Mr.A.Wirasinghe, Permanent Secretary of the Mlnistry of Public lorks, Posts and Telecommunications. 4. IDS made its first credit to Ceylon in June 1968 for a Lift Irrigation Project. The credit became effective in August and no disburse- ments have yet been made. The Bank's first three loans to Ceylon made between 1954 and 1961 were for power and are now fully disbursed. A $4 million loan was made to the Development Finance Corporation of Ceylon last November. The loan became effective at the end of February 1968 and since then the Loan Account has been credited for eleven sub-projects totalling over $1.6 million. The following is a summary statement of Bank loans and IDA credits to Ceylon as at August 31, 1968.  -2- Loan or Amount (US$ million) Credit No. Year Borrower Purpose Bank IDA Undisbursed 101 CE 1954 Government of Ceylon Power 15.9 - 209 CE 1958 Government of Ceylon Power 7.3 - 283 CE 1961 Government of Ceylon Power 14.1 - - 520 CE 1967 Development Finance Cor- Industrial poration of Ceylon Finance 4.0 - 4.0 121 CE 1968 Government of Ceylon Irrigation - 2.0 2.0 Total (less cancellations) 41.3 2.0 of which has been repaid to Bank and others 9.8 Total now outstanding 31.5 Amount sold 3.3 of which has been repaid 2.6 0.7 Total now held by Bank and Iab 30.8 2.0 Total undisbursed 4.o 2.0 6.0 IFC has made no investments in Ceylon. 5. No further loans or credits in Ceylon are likely to be ready for presentation to the Executive Directors before mid-1969. PART II - DESCRIPTION OF THE PROPOSED LOAN AND CREDIT 6. Borrower: government of Ceylon. Purpose: To improve road maintenance and workshop facilities, to reconstruct 19 bridges, to provide consultants for highway feasibility studies, detailed engineering and management and advisory services. Amount: Various currencies equivalent to US$4.9 million from the Bank and US$4.9 million from IDA. Amortization: Bank Loan - In 30 years including a ten-year period of grace, through semi-annual installments beginning January 1, 1979 and ending January 1, 1999. IDA Credit - In 50 years including a ten-year period of grace, through semi-annual installments of 1x of 1% from Febr'iary 1, 1979 through A.ugust 1, 1988 and of Vl