U.S. commits $553 million to Sri Lanka port expansion

FORUM Staff

The United States International Development Finance Corp. (DFC) has committed more than $500 million toward development of a deep-water shipping container terminal in the Port of Colombo, Sri Lanka, the agency announced in November 2023.

The $553 million package provides financing to Colombo West International Terminal Private Ltd. for the West Container Terminal. The project partners also include John Keells Holdings, a Sri Lanka-based conglomerate, India-based Adani Ports & Special Economic Zones Ltd. and the Sri Lanka Ports Authority. The Port of Colombo, on Sri Lanka’s west coast, is the largest and busiest transshipment port in the Indian Ocean. It has operated at more than 90% percent capacity since 2021, at roughly 27 million metric tons of cargo a year.

“DFC works to drive private-sector investments that advance development and economic growth while strengthening the strategic positions of our partners. That’s what we’re delivering with this infrastructure investment in the Port of Colombo,” Scott Nathan, the agency’s CEO, said in a news release. “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.”

U.S. Ambassador to Sri Lanka Julie Chung said the project will facilitate private sector-led growth in Sri Lanka and attract crucial foreign exchange during the nation’s economic recovery.

“This financing is symbolic of the United States’ long-standing commitment to the development and well-being of the people of Sri Lanka. Sri Lanka regaining its economic footing will further our shared vision for a free and prosperous Indo-Pacific,” Chung said in a statement.

Dredging for the terminal began in November 2022, with the first stage to be completed in the third quarter of 2024, Reuters reported. The project is expected to be completed by late 2025.

The People’s Republic of China’s (PRC) state-run China Merchants Port Holdings also operates a terminal at the Colombo port. That project and others financed under Chinese Communist Party General Secretary Xi Jinping’s One Belt, One Road (OBOR) infrastructure scheme, included large loans that Sri Lanka and other nations have struggled to repay. In 2017, Sri Lanka turned over the Hambantota port, on the country’s southern coast, to the PRC under a 99-year lease. That deal erased about $1 billion of Sri Lanka’s debt but raised regional concerns that it could lead to a Chinese military base at the port.

Debt owed to Beijing by developing countries, mostly as a result of OBOR projects initiated since 2013, exceeds $1.3 trillion, according to a November 2023 report from AidData, a research institute at the U.S.-based College of William and Mary. The share of Beijing’s loans to developing countries in financial distress was 75% in 2021. Those debts were owed by at least 57 countries, according to the AidData report.