Sri Lanka's finance ministry says Japan has agreed to provide a loan to build the first light railway system aimed at easing traffic congestion in the capital city of Colombo.

In a statement Tuesday, the ministry says the loan will be granted in six stages until 2024 for the $1.8 billion project that will begin this year.

It said an agreement to release the first instalment of $260 million was signed Monday between the Japan International Cooperation Agency, which coordinates official development assistance, and Sri Lanka's finance ministry.

The loan comes as Sri Lanka struggles to repay $5.9 billion in foreign loans this year, of which 40 percent needs to be serviced during the first three months.