Bank of China offers Lanka $300m loan

COLOMBO: Sri Lanka is considering an offer from Bank of China for a loan of $300 million, which could be raised to $1 billion, to help it meet repayments during coming months, two sources in Colombo with knowledge of the offer said on Tuesday. A series of credit rating downgrades and a political crisis have made it harder for Sri Lanka to borrow as it faces record high repayments of $5.9 billion this year, $2.6 billion of which fall due in the first three months.

"The risk premium has gone up after the recent political crisis and the borrowing cost is expensive after the rating cuts. This loan will be used to repay some loan repayment in the first quarter," one source said.

As of the end of 2018, nearly a quarter of Sri Lanka's total foreign debt was owed to China, which has lent some $8 billion while building ports, highways and planning other major investments in the island state.

A second source said Lanka's cabinet had already asked finance minister to negotiate the loan, which has been offered at 6-month LIBOR plus 260 basis points. It has to be repaid within three years.