China's Export-Import Bank will provide a loan of $278.2 million to Sri Lanka to help lay a rail track to a key port which Beijing is building, according to a Reuters report on Tuesday.

The port of Hambantota on the southern tip of the Indian Ocean island nation is envisioned as a refueling and service point for cargo ships, which pass a few kilometers away on one of the world's busiest East-West shipping lanes.

Sri Lanka's finance ministry said on Tuesday that the Chinese loan will be used to construct a 27 km single-line track connecting Hambantota to Matara, the biggest coastal town in the south.

"The demand for transport between the Southern Province and other provinces of the country will increase due to developments in the Southern region and operations of the Hambantota Port," the finance ministry said.