The loan will be used to extend the railway line from Matara to Kataragama, an announcement on a government website stated. The 71-mile extension will be in three phases, from Matara to Beliatta, from Beliatta to Hambantota and from Hambantota to Kataragama. Officials said it should be completed by the end of 2014.
The loan will come through the Export-Import Bank of China, the Sri Lankan Finance and Planning Ministry announced. Terms include an annual interest of 2 percent with repayment over 20 years, including a 5-year grace period.
The project will involve constructing bridges over rivers, viaducts required over the Nilwala River flood plain, railroad crossings, road diversions, four railway stations and ground treatment.
The government said it expects demand for rail transport between the Southern and other provinces of the country to increase due to rapid development and operations at the Hambantota port and a new airport coming up.
The Hambantota port, opened in 2010, was built with Chinese assistance.
The rail project will help provide clean, efficient and economical transport service to facilitate commuter and cargo transport between Colombo and Kataragama, the report said.