The Exim Bank will provide 200 million US dollars under preferential buyers credit terms and the government of China will give a concessional loan of 508 million yuan.
China Exim Bank's preferential buyers credit usually come with only 2.0 percent interest and 20 year payback with 5 or 7 year's grace period, a half percent management fee and commitment fee.
The project involves building 26.75 kilometres of track, bridges, stations underpasses and overpasses. It is part of a plan to connect Matara with Kataragama.
Sri Lanka will have to bear a slightly higher cost with repaying renminbi loans as the Chinese currency is set to appreciate against the US dollar.
US Mercantilists have put pressure on China to appreciate the currency falsely claiming that the Renminibi is undervalued.