Sri Lanka, an island off India's southern coast, is mired in its worst financial crisis in over seven decades after its foreign exchange reserves ran to record lows last year forcing its economy to contract by 7.8% in 2022.
Ports-to-edible oils Adani group, controlled by Indian billionaire Gautam Adani, holds a 51% stake in the west container terminal of the port, which also has a terminal run by China Merchants Port Holdings Co Ltd.
"DFC's commitment of $553 million in private sector loans for the West Container Terminal (WCT) will expand its shipping capacity, creating greater prosperity for Sri Lanka - without adding to sovereign debt - while at the same strengthening the position of our allies across the region," DFC CEO Scott Nathan said in a statement.
India extended about $4 billion in swaps and credit lines to Sri Lanka last year, providing critical support to import fuel, medicine and fertiliser during the worst of the crisis.
India and China vie for influence in the island nation of 22 million, located near busy shipping routes. Sri Lankan conglomerate John Keells Holdings owns 34% of the WCT and the rest is held by the state-run Sri Lanka Ports Authority (SLPA).
Dredging for the terminal kicked off last November with the first stage to be completed in the third quarter of 2024 and the full project to be finished by the end of 2025.
(Reporting by Uditha Jayasinghe; Editing by Kim Coghill)