China has agreed to provide a loan of 989 million to Sri Lanka to build an expressway that will connect the island nation's tea-growing central region to a China-run seaport on the southern coast.

A finance ministry statement said Friday that the Export-Import Bank of China has agreed to provide a concessional loan covering 85 percent of the contract prices for the expressway, whose total estimated cost is USD 1.16 billion.

The loan comes as Sri Lanka struggles to repay USD 5.9 billion in foreign loans this year, of which 40 per cent must be serviced by the end of this month.

Much of Sri Lanka's foreign debt is from China.frozen during the period of restrain.