Sri lanka terminal receives US DFC half a billion loan

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The US International Development Finance Corporation (DFC) has confirmed it is committing US$553 million to support a new deepwater shipping container terminal at the Port of Colombo, Sri Lanka.

DFC is making a direct loan to the consortium developing the terminal, which is 51 per cent owned by India’s largest port operator, Adani Ports & Special Economic Zones Ltd, while other partners are Sri Lanka’s John Keells Holdings, which has a 34 per cent share, and the Sri Lanka Ports Authority with the remaining 15 per cent.

The US agency states that the new terminal will cater to growing economies in the Bay of Bengal and comes at a good time for the Port of Colombo, which has been operating close to its existing capacity since 2021. Scott Nathan, CEO at DFC notes: “DFC works to drive private-sector investments that advance development and economic growth while strengthening the strategic positions of our partners. That is what we are delivering with this infrastructure investment in the Port of Colombo. Sri Lanka is one of the world’s key transit hubs, with half of all container ships transiting through its waters. DFC’s commitment of $553 million in private-sector loans for the West Container Terminal will expand its shipping capacity, creating greater prosperity for Sri Lanka – without adding to sovereign debt – while at the same time strengthening the position of our allies across the region.”

The DFC was established five years ago in response to Beijing’s massive global infrastructure building campaign, known as the Belt and Road Initiative. Through it, Beijing has invested tens of billions of dollars each year to build roads, railways, ports and airports, typically in developing nations, to foster trade and goodwill towards China.

Yet some projects have caused controversy, including in Sri Lanka. The country borrowed heavily from China to develop Hambantota Port on the island’s southeastern coast, but the project has failed to generate enough revenue to meet the loan obligations so in 2017 the port was leased to Chinese interests.

The loan from DFC to support Colombo’s development appears to be a move to combat Chinese influence in this strategic shipping location and comes at a time when Sri Lanka’s economy is suffering its worst financial crisis in over seven decades. In 2022, the country’s economy contracted by 7.8 per cent.