Sri Lanka’s central bank on Friday announced it had secured a $1 billion Chinese loan as the island, a key link in Beijing’s ambitious Belt and Road initiative, develops closer relations with Asia’s largest economy.

Central Bank Governor Dr. Indrajit Coomaraswamy said that first half of the loan will be released later this month and the balance will be received in October.

“During consultations (with the Chinese over the loan) it was clear that they see us as a key strategic partner as far as the (Belt and Road) initiative is concerned, given our location,” he told reporters in Colombo.

The eight-year loan by China Development Bank carries a 5.25 percent interest rate with a three year grace period.

Coomaraswamy said that the terms of Chinese loan were better than other international lenders and the country hopes to secure additional $200 to $250 million from China’s domestic financial market by issuing “Panda bonds”.

Last month, China vowed to keep providing financial help, including loans, to Sri Lanka despite warnings about the island nation’s mounting debt.

Sri Lanka last year granted a 99-year lease on a strategic port to Beijing over its inability to repay Chinese loans for the $1.4 billion project.  

The International Monetary Fund, which bailed out Sri Lanka in June 2016 with a $1.5 billion staggered loan, has warned that Colombo over its heavy debt.

Sri Lanka’s economy has been on the mend since the IMF bailout, but growth in 2017 at 3.1 percent was the slowest in 16 years.

The central bank had forecast 2018 growth at between 4.0 to 4.5 percent, but Coomaraswamy on Friday revised his estimate for the calendar year to below 4.0 percent.

Source: AFP

-Agencies