Sri Lanka signs $308 million loan agreement with China 

Sri Lanka on Tuesday signed a loan agreement with China worth 2 billion Renminbi (USD 308 million) to support its COVID-19 response, economic revival and financial stability, the Chinese embassy said.

"China Development Bank and Sri Lankan Government have entered into an agreement of RMB 2 Billion (approx ₹ 61.5 Billion) Term Facility today (Aug 17), upon a request from Sri Lanka side to support its #COVID19 response, economic revival, financial stability and livelihood betterment," the embassy tweeted.

The latest loan is part of a USD 1.2 billion budget support in credit agreed earlier. Sri Lanka has received USD 1 billion in credit support in two tranches of USD 500 million each in April 2021 and March 2020 respectively.

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The coronavirus pandemic has severely jolted the Sri Lankan economy which is dependent on its tourism sector.

Earlier in February, Sri Lanka settled a USD 400 million currency swap facility with India, to tide over financial strains.

Speculation that Beijing is trying to lure Sri Lanka into a debt trap has been outright rejected by the President Gotabaya Rajapaksa-led government.

Struggling to pay back over USD 8 billion-dollar Chinese loans and investments, the previous Sri Lankan government had handed over the majority share of the Chinese-built strategic southern port of Hambantota to a Chinese state-owned company on a 99-year lease in 2017.