Sri Lanka accepts a US$1 billion, eight-year loan from China Development Bank

Sri Lanka accepted the eight-year syndicated loan to repay loans maturing this year, finance ministry officials said

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Sri Lankan President Maithripala Sirisena (seen in January 2016) watches a cultural show at Independence Square in Colombo. Photo: AFP

Published: 7:24am, 26 May 2018Updated: 11:21pm, 26 May 2018

Sri Lanka has accepted an eight-year China Development Bank $1 billion syndicated loan to repay loans maturing this year, two top Sri Lankan Finance Ministry officials said on Friday.

The bank was chosen from among four bidding for the loan, which the government plans to use towards repaying other loans, one official said.

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“All three others had three-year tenure and only China Development Bank had a bid for an eight-year tenure. The effective rate of return is around 5.3 per cent,” the official said.

“It was a good offer. The loan has a three-year grace period. Then in the next five years, the government will be repaying $100 million biannually.”

Another ministry official confirmed the deal.

Sri Lankan residents look out from a beach at Dehiwala, a suburb of Colombo on May 20, 2018. Sri Lanka is headed for a debt crisis, the finance ministry warned in May, blaming a series of costly projects commissioned by the previous government for record-high repayments. Photo: AFP

The new borrowing comes after Sri Lanka raised a record US$2.5 billion via two tranches of sovereign bonds last month.