China has refused a loan of US$500 million sought by the Sri Lankan Government to buy petroleum products and stressed that China would only approve only project loans, informed sources said yesterday

A Finance Ministry official said the loan which was being negotiated last year had not materialised because China was only prepared to grant project loans for which interest rates were relatively high.  

China had become Sri Lanka’s biggest lender. The country had obtained US$3.1 billion in loans and export credit to Sri Lanka about 18 months ago. The government had obtained Chinese loans, at interest rates varying from 2.9 per cent to 8.25 per cent, for major development projects such as the building of the Hambantota Port, the Mattala Airport, the Moragahakanda Irrigation Scheme and the Norochcholai Coal Power Plant.  Meanwhile the country’s total debt burden has increased to Rs.6,610 billion with 52 per cent of it being from domestic borrowings. (Kelum Bandara )