International Development Finance Corporation (DFC), the US' development finance institution, has announced it will provide $553 million in funding for the Colombo West International Terminal by India's Adani Ports and Special Economic Zone Ltd.
This investment marks the first time a U.S. government agency has funded a project by the Adani Group, one of India's largest business conglomerates.
The move could be seen as a way to boost the influence of India in Sri Lanka to offset the clout of China, which has already created an enormous port in the island nation, and taken it over when Sri Lanka could no longer service the debt. Sri Lanka is located in a strategically important region in the Indian ocean.
DFC CEO Scott Nathan said the investment will "strengthen the position of US allies..in one of the world’s key transit hubs".
"Sri Lanka is one of the world’s key transit hubs, with half of all container ships transiting through its waters. DFC’s commitment of $553 million in private-sector loans for the West Container Terminal will expand its shipping capacity, creating greater prosperity for Sri Lanka – without adding to sovereign debt – while at the same time strengthening the position of our allies across the region," it added.
The move comes as USA is worried about increasing attempts by China to establish its influence over key maritime routes, such as South China Sea and Straits of Malacca. The U.S. and India are developing sustainable infrastructure to counter China's vast Belt and Road Initiative across Asia. The U.S. considers the Indo-Pacific region strategically important.
Adani Group is one of India's key conglomerates, and is supposed to have India's backing for the project.
The deepwater container terminal will be developed by Adani Ports in a joint venture with Sri Lanka's leading company John Keells Holdings and the state-owned Sri Lanka Ports Authority. When completed, the project is expected to significantly expand shipping capacity at the vital Port of Colombo, creating major economic prosperity for Sri Lanka.
The Port of Colombo is a key transshipment hub in the Indian Ocean, operating at over 90% utilization since 2021.
The new terminal will cater to the expanding economies in the Bay of Bengal region, strengthening Sri Lanka's pivotal role along major international shipping routes. Adani Ports aims to become the largest ports and logistics platform globally within the next decade.
U.S. Ambassador to Sri Lanka Julie Chung said the DFC investment will facilitate crucial private sector-led growth in Sri Lanka and attract vital foreign exchange inflows during the country's ongoing economic recovery.
Nathan said the project will advance economic development for Sri Lanka without adding to its sovereign debt burden.
Adani Ports and the broader Adani Group have been expanding their global footprint through strategic investments in emerging markets like Sri Lanka.
The DFC is an independent agency of the U.S. federal government that provides financing for private development projects and was formed in 2019 by consolidating the Overseas Private Investment Corporation (OPIC) and USAID's Development Credit Authority.
It invests across sectors like energy, healthcare, infrastructure, technology, food security, etc.
DFC mobilizes private capital to drive growth and make investments that traditional commercial lenders cannot.
It operates on a self-sustaining basis by charging fees and interest on its investments and has a $60 billion investment cap set by Congress to carry out its mission.
The Adani Group hailed the U.S. investment as proof of the international community's faith in its vision and ability to execute complex port infrastructure projects with global standards.