Bank of China offers Sri Lanka US$300m loan

Sri Lanka is considering an offer from Bank of China for a loan of US$300 million, which could be raised to US$1 billion, to help it meet repayments during coming months, two sources in Colombo with knowledge of the offer told Reuters 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 US$5.9 billion this year, US$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 repayments 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 US$8 billion while building ports, highways and planning other major investments in the island state.

There was no immediate comment from Sri Lanka's Finance Ministry, which is on holiday for a local festival, and calls to the Bank of China in Colombo were also unanswered.

But a second source said Sri Lanka's Cabinet had already asked Finance Minister Mangala Samaraweera to negotiate the loan, which has been offered at six-month Libor plus 260 basis points. It has to be repaid within three years, the source added.

The six-month Libor was at 2.865 on Tuesday. (Reuters)