$500 million borrowing from China Development Bank is a desperate bid to shore up foreign exchange reserves.

Sri Lanka Secured a $500 million loan from China on Monday this week, in a desperate bid to shore up its foreign exchange reserves as the local currency hit a record low.

The Sri Lankan Embassy in Beijing said the loan agreement with the China Development Bank will “infuse vitally required foreign exchange” into the island’s pandemic-battered economy.

It is the second Chinese loan made in less than three weeks.

Last month, the People’s Bank of China granted a $1.5 billion currency swap to finance imports from China, a key supplier of manufactured goods to the island, which is struggling to pay for imports.

Sri Lanka’s rupee hit a record low of 202.73 to the US dollar, as the country’s foreign reserves fell to $4.05 billion at the end of March, the lowest in 12 years.

The country’s economy contracted by a record 3.9% last year.

A ban on importing non-essential goods and food has been in place for 13 months as the economy struggles to recover from militant attacks in March 2019 that killed 279 people and struck a heavy blow against the vital tourism sector.

Chinese influence in the South Asian nation has been growing in recent years, through loans and projects under Beijing’s vast Belt & Road Infrastructure Initiative, raising concerns among regional powers and Western nations.

Between 2005 and 2015, Colombo borrowed billions from China, accumulating a mountain of debt for expensive infrastructure projects.

Sri Lanka was forced to hand over its strategic Hambantota port on a 99-year lease to a Chinese company in 2017 after it was unable to service the $1.4 billion debt from Beijing used to build it.