COLOMBO, Nov 28 (Reuters) - Sri Lanka has borrowed $1.5 billion from Iran to fund infrastructure projects, including an expansion of the island's only oil refinery, officials said on Wednesday.

The funds will also be used to finance housing, power and irrigation projects.

The $1.5 billion loan was signed in Tehran, where a Sri Lankan President Mahinda Rajapaksa held talks with his Iranian counterpart Mahmoud Ahmadinejad.

"We have signed eight MOU's. We will get a total of about $1.5 billion," said Chandrapala Liyanage, the president's media director said.

He said $700 million would be used to expand the 50,000 barrels per day Sapugaskanda oil refinery while $450 million would be used for agricultural and irrigation projects.

Chandrapala did not elaborate or detail the terms of the credit, other than to say that the oil loan has to be repaid in 10 years.

The government plans to triple the refinery's output to 150,000 barrels per day.

Infrastructure work has often been a low priority in Sri Lanka because of a civil war between the state and Tamil Tiger rebels that has killed more than 70,000 people since 1983.

The loan marks the latest in a flurry of fund raising by Sri Lanka.

On Nov. 16, it borrowed 50 million British pounds ($104 million) from the British government to reconstruct 222 bridges and build two fly-overs around Colombo.

On Oct. 24, the central bank sold $500 million in 5-year sovereign bonds with a coupon of 8.25 percent.

(Reporting by Shihar Aneez; Editing by Neil Fullick)

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