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Sri Lanka has restarted the stalled 38-km Central Expressway connecting Colombo and Kandy with a new USD 500 million Chinese loan, marking the first funding from China since the country's 2021 debt default. Launched in 2016, the project was suspended in 2023 due to financial and material shortages, with one-third completed at the time. The government aims to finish the highway by 2028, which will improve connectivity and support economic activity. The funding comes on concessionary terms, amid Sri Lanka's ongoing debt restructuring and the competition between China and India for regional influence.
Sri Lanka has resumed construction on a key highway project after securing a new USD 500 million loan from China, marking the first funding from its largest bilateral creditor since the country defaulted on its foreign debt three years ago. The project involves a 38-km (24-mile) stretch of the Central Expressway, connecting Colombo, the commercial hub, with Kandy in the central highlands. Advertisement
The highway project was initially launched in 2016 but was suspended in 2023 when it ran out of funds and essential building materials following Sri Lanka's worst financial crisis. At the time of suspension, around one-third of the road had been completed. The highway is expected to improve travel efficiency between the two major cities and support economic activity along the route.
Highways Minister Bimal Rathnayake stated that the government now aims to complete the highway by April 2028. Sri Lankan President Anura Kumara Dissanayake said the USD 500 million loan from China EXIM Bank was provided on concessionary terms. He added that although financial crises typically cause a decade-long development setback, Sri Lanka can halve the recovery time with careful planning. The president also projected that the country would post growth close to 5% this year and that the upcoming 2026 budget is designed to address remaining economic challenges.
Sri Lanka's recovery has been supported by a USD 2.9 billion bailout from the International Monetary Fund, which helped the country achieve 5% growth in 2024, marking a rebound after a severe decline in foreign exchange reserves. Earlier this year, Sri Lanka completed a USD 10 billion restructuring of its bilateral debt, including agreements with Japan, India, and China.
According to the finance ministry, Sri Lanka currently owes China USD 4.9 billion, mostly for infrastructure projects, including highways. The Central Expressway construction is being carried out by China Metallurgical Group Corporation. Chinese Ambassador to Sri Lanka, Qi Zhenhong, described the project as a symbol of partnership and cooperation between the two countries.
The highway project also reflects broader geopolitical interests, as both China and India continue to seek influence in strategically located Sri Lanka, which lies in the Indian Ocean just off the southern tip of India. The completion of the expressway is expected to significantly reduce travel time, facilitate trade and tourism, and enhance connectivity across central Sri Lanka.
Source Reuters
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