China to Offer $1.5 Billion Credit Facility to Sri Lanka

China is considering providing Sri Lanka with a $1.5 billion loan facility as part of an effort to help the island nation overcome the worst economic crisis in decades.

Sri Lanka's Chinese ambassador to China, Qi Zhenhong said that he was also discussing up to $1 billion in individual loans requested by the Sri Lankan government.

He added that  South Asian country was provided with a $500 million loan from the  Development Bank of China on March 18. 

Sri Lanka has approximately $4 billion in debt to be this year, including $1 billion in international sovereign bonds that will mature in July. However, that reserve had fallen to $2.31 billion by the end of February, down about 70% from two years ago.

The country is also struggling to make payments for imports of essentials such as fuel and medicines and enforcing nationwide power cuts due to a lack of fuel for power generation.

Over the last decade, China has lent more than $5 billion to Sri Lanka to build highways, ports, airports and coal-fired power plants. But critics say the money was spent on low-yielding white elephant projects, which China has denied.

Prior to the pandemic, China was the main source of tourists for Sri Lanka and it also imports more goods from China than any other country. Sri Lanka is also the key part of China’s Belt and Road Initiative, a long term plan to fund and build infrastructure linking China to the rest of the world.