Sri Lanka to receive US $ 500mn Chinese concessional loan

Treasury Secretary Sajith Attygalle exchanging loan agreement with China Development Bank Deputy Director General Wang Wei after signing in the presence of Prime Minister Mahinda Rajapaksa and Chinese Embassy Chargé d’affaires Hu Wei

Sri Lanka yesterday signed agreements to receive a US $ 500 million concessional loan from China Development Bank (CDB).

A Chinese embassy statement said the agreement was signed at the Temple Trees in the presence of Prime Minister Mahinda Rajapaksa, Chinese Embassy Chargé d’affaires Hu Wei and CDB Vice President Ma Xin.

“The facility was urgently requested by the Sri Lankan government and supported by the Chinese side, under the current financial situation in Sri Lanka and the background of fighting the COVID-19 pandemic with all-out efforts,” the embassy statement said. 

A Finance Ministry statement said although this Foreign Currency Term Financing Facility (FTFF) 2020 is an upsizing of the FTFF 2018, the terms of this facility are an improvement over 2018.

“This includes the extension of the maturity to 10 years, from eight years in the FTFF 2018, with a grace period of three years. The interest rate too is an improvement over 2018, with the margins over six months LIBOR being less than that of 2018,” the Finance Ministry statement said. 

According to the Chinese embassy statement, the interest cost is highly competitive and favourable to Sri Lanka and linked to a six-month US dollar LIBOR, with a grace period of three years. 

The loan will be disbursed early next week and is expected to bolster the official foreign reserves of the country.