Sri Lanka considers big China loan to repay foreign debts

The government has appointed a three-member committee to negotiate the deal, according to Finance Ministry Spokesman M R Hasan. The loan is repayable in three years, he said.

Sri Lanka must repay USD 5.9 billion in foreign loans this year of which 40 per cent needs to be serviced during the first three months. It paid back USD 1 billion this week.

A large chunk of Sri Lanka's foreign debit is from China, which considers the island nation to be part of its "One Belt One Road" initiative. China has heavily invested in Sri Lanka infrastructure such as a seaport, airport and highways.

It has invested USD 1.5 billion in a port city being built on reclaimed land off the island's west coast.

President Maithripala Sirisena's government had criticized the previous administration for leading the country into a Chinese debt trap by allowing unsolicited projects at high commercial interest rates.

However, it has retracted its opposition to Chinese projects owing to economic pressures.

The seaport and airport generate little revenue despite their high maintenance cost and Sri Lanka has leased out the seaport to a joint China-Sri Lanka venture with China holding a major share.