Sri Lanka to receive about $600m ADB funding post-IMF approval

“Sri Lanka is set to receive approximately $600 million in funding from the Asian Development Bank (ADB) following the approval of the second tranche of a $2.9 billion bailout by the International Monetary Fund (IMF). This financial injection comes as Sri Lanka strives to recover from its severe economic downturn, marked by a 7.8% contraction in 2022 due to record-low foreign exchange reserves. The IMF’s first review, scheduled for approval next week, will pave the way for a $334 million release, while the ADB plans to provide a total budget support of $2 billion over the next four years.

According to Takafumi Kadono, Country Director of ADB, Sri Lanka Resident Mission, the proposed budget support for 2024 is estimated to be between $500 million and $600 million, contingent upon meeting policy requirements. Kadono emphasized that this financial assistance is not without conditions, as Sri Lanka is expected to implement reforms outlined in the IMF program, addressing issues such as restructuring state enterprises, reducing budget deficits, and enhancing governance.

The ADB’s support will be disbursed in stages, with an initial $200 million slated for board approval on December 8, contingent upon the IMF’s first review approval on December 12. Future allocations include $200 million for power sector reforms in 2024, $100 million for the water sector, and $50-$70 million for the tourism sector. Additionally, $100 million is allocated to improve access to financing for small and medium-sized enterprises, along with another $100 million for enhancing public finance and debt management.

Kadono emphasized the importance of addressing the fundamental economic challenges and latent weaknesses in Sri Lanka’s institutions, stating that the reforms outlined are not temporary measures but essential for the country’s economic stability and growth.”