Iran becomes Sri Lanka's top lender

COLOMBO: Iran has emerged as Sri Lanka's biggest donor this year, knocking Japan from the position of being the war-torn island's main benefactor, the finance ministry said on Monday.

In the five months to May this year, the war-torn island has received USD 1.05 billion in foreign aid, of which project loans accounted for 959 million and grants for 90 million, the treasury said in its mid-year fiscal report.

Western donors have been threatening to cut aid to Sri Lanka because of worsening human rights abuses and escalating violence in the civil war with separatist Tamil Tiger rebels.

The treasury said foreign aid would have almost halved if Iran had not chipped in with USD 450 million to build a hydro power project and upgrade the island's sole oil refinery.

Other key donors included Denmark (USD 155.2 million), India (USD 109.2 million), the Asian Development Bank (USD 90 million), World Bank (USD 43.1 million) and Japan (USD 42.2 million).

Japan and the Manila-based Asian Development Bank have in the past been the biggest lenders to the island.