The US International Development Finance Corporation (DFC) has announced $553 million in financing for a port terminal project in Colombo, Sri Lanka. This project represents the initial entry of an Indian company, the Adani Group, into the sector. The financial support is seen as a crucial move amid Sri Lanka’s severe financial crisis, driven by dwindling foreign exchange reserves.
Sri Lanka, an island nation located off the southern coast of India, has been grappling with its most profound economic downturn in over seven decades. A precipitous drop in foreign exchange reserves led to a substantial economic contraction of 7.8% in 2022.
The Adani Group, a conglomerate with interests ranging from ports to edible oils, led by Indian billionaire Gautam Adani, holds a 51% stake in the west container terminal of the port. This port also houses a terminal managed by China Merchants Port Holdings Co., Ltd., exemplifying the strategic competition for influence between India and China in Sri Lanka.
The DFC’s commitment of $553 million in private sector loans for the West Container Terminal (WCT) is expected to augment the shipping capacity of the port. This expansion is viewed as a means to foster prosperity in Sri Lanka without exacerbating the country’s sovereign debt. Additionally, the move is seen as reinforcing the position of US allies across the region. DFC CEO Scott Nathan emphasised the potential positive impact of the project in a statement.
India had previously extended significant support to Sri Lanka, providing approximately $4 billion in swaps and credit lines last year. These measures were pivotal in helping Sri Lanka import essential commodities such as fuel, medicine, and fertilisers during the height of the financial crisis.
The West Container Terminal project is a collaborative effort, with the Adani Group holding the majority stake at 51%, Sri Lankan conglomerate John Keells Holdings owning 34%, and the state-run Sri Lanka Ports Authority (SLPA) possessing the remaining share. Dredging for the terminal commenced in November of the previous year, with the first phase set to conclude by the third quarter of 2024 and the overall project slated for completion by the end of 2025.
