The Sri Lankan government signed a US $500 million loan agreement with the state-run China Development Bank (CDB) last week, less than a month after it signed a currency swap deal worth USD 1.5 billion with Beijing, amidst rising concerns of the country’s ability to meet its debt payments.
A statement released by the Sri Lankan embassy in China detailed, that the US $500 million loan was a part of a US $1 billion loan deal signed last year in which US $500 million was released last April as an emergency COVID relief fund.
The loan is being extended at a time Sri Lanka’s foreign exchange reserves dropped to US $4.05 billion in March 2021, the lowest since a currency crisis in 2008/9. A recent report released by the World Bank highlights the devastating impact coronavirus has had on the economy, with Sri Lanka experiencing its worth growth rate on record.
The signing of the loan agreement comes at a time of growing pressure on the Sri Lankan government with critics saying the country is becoming a “Chinese colony”.