The government will use the US$500 million loan from the China Development Bank (CDB) for budgetary support, Money, Capital Markets and State Enterprise Reforms Minister Ajith Nivard Cabraal told the Daily Mirror newspaper.

According to the Daily Mirror, State Minister of Finance, Capital Markets, and Public Enterprise Reforms Ajith Nivard Cabraal said the loan will be signed between the Finance Ministry and the China Development Bank.

The fresh loan is in addition to an earlier loan of US$500 million obtained from China in early 2020, he said.

State Minister Cabraal said as part of its debt management criteria, the Government will reduce its dependence on international sovereign bonds as an instrument for raising financial capital.

He said it was essential to have a range of instruments for this purpose as there is market risk involved in depending on one instrument.

As per the Budget 2021, which is to be presented in Parliament in November, the borrowing limit for the year has been fixed at Rs. 2,900 billion.

Few days ago Chinese Embassy in Colombo said that the US$500 million is still under negotiation and yet to be finalized.