Sri Lanka is struggling to repay its foreign debt which is at a record $5.9 billion. The current amount of $300 million can be expanded to $1 billion.
On Tuesday, in a move that deepens China’s grip on the island nation of Sri Lanka, the Bank of China, the country’s fourth-biggest lender by assets, has offered a loan of $300 million to Sri Lanka with the option of expanding the amount to $1 billion, said a source in Colombo with direct knowledge of the matter.
The Sri Lankan government is somewhat compelled to consider China’s ‘generous’ offer because of “difficulty in borrowing money after recent ratings downgrades”, said the source said on the condition of anonymity since the information is yet to be made public.
Neither Sri Lanka’s Ministry of Finance nor Bank of China immediately responded to requests for comments.
The development deepens Sri Lanka’s foreign debt which is at a record $5.9 billion and which it is struggling to repay.
A surge in China’s lending practices in recent years have vented fears of a lack of transparency in giving these loans and the fact that very little official data is available on the terms and conditions of such loans.