The loan covers all nine districts hit by the 2004 tsunami, and looks to assist projects related to infrastructure, tourism, energy and telecommunications related sectors, Julian Wilson, Head of Delegation, European Commission Sri Lanka and Maldives told reporters here.

Of this credit line, between 20-25 million euros have been allocated to Sri Lanka's Central Bank for their ongoing subsidized tsunami loan scheme, while the balance will help shore up small and mid-sized enterprises hit by the disaster.

"Businesses outside tsunami areas, but whose turnover was affected by the disaster, also qualify under this special tsunami loan," Wilson said.

"The challenge is to re-establish the local economy, maintain employment and create new job opportunities," said Jean Louis Biancarelli, of the European Investment Bank.

About 31,000 people died and a million were left homeless during the December 2004 tsunami, which damaged the island's shoreline and left a US$3.2 billion repair bill.

International donors have pledged around US$2.2 billion as relief efforts, and Wilson said today's credit line forms part of the European Union's 200 million euro pledge for Sri Lanka.

The EU had earlier given around 130 million euros in grant and humanitarian aid in the immediate aftermath of the tsunami.