Sri Lanka is negotiating a $1 billion loan from China to construct a highway linking the capital Colombo to the hilly resort city of Kandy, even as the heavily-indebted South Asian island nation makes arrangements to pay down $5.9 billion in foreign loans this year.

Finance Ministry spokesman M.R. Hasan on Saturday said that he's waiting to hear whether terms of the loan for the highway project have been approved.

A large chunk of Sri Lanka's foreign debt is from China, which sees Sri Lanka as a key link in its transcontinental Belt and Road infrastructure initiative.

Read more: China to build houses, roads in northern Sri Lanka to extend sway

President Maithripala Sirisena's government had criticised the previous administration of strongman Mahinda Rajapaksa for leading the country into a Chinese debt trap. However, the government has turned to China to help relieve economic pressures.