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Minister Keheliya Rambukwelle said the total cost of the project was not specified as yet, but the cabinet of ministers had approved the plan to borrow from local banks.
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He said the currency of the loan was also not specified as yet.
Under the earlier project 692 kilometres of roads were proposed to be rebuilt by Sri Lanka's Road Development Authority through a 500 million US dollar credit from commercial banks.
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The loans were given to the RDA under a Treasury guarantee.
Sri Lanka has given high priority to building roads with the road authority becoming one of the most important spending agencies after the end of a 30-year war.
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It is not clear whether RDA loans are part of budgetary expenses.
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The finance ministry said there was 3.2 billion US dollars of foreign financing committed for roads by the end of 2011.