President Ahmadinejad of Iran is on his way to Sri Lanka, for a visit seen as a step in realigning Colombo`s foreign policy away from traditional western allies.
Mr Ahmadinejad has already pledged one-point-nine billion dollars in soft loans and grants for development projects in Sri Lanka.
The Islamic Republic has also voiced its readiness to spend 700million dollars for equipping the only Lankan Oil Refinery, Iranian official news agency, IRNA said.
Iran has decided to increase the capacity of the refinery to three fold, from 50,000 pbd to 150,000 pbd, it said.
The BBC Colombo correspondent says Sri Lanka has turned more towards Asian nations after western criticism of its human rights record as war has resumed with the Tamil Tiger rebels.
On the way, Mr Ahmadinejad stopped in Pakistan for talks about a long-proposed pipeline to bring Iranian natural gas to India via Pakistan.
The United States opposes the pipeline. Mr Ahmadinejad will stop in India on his way back to Iran.