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Country Strategy and Program Update 2003-2005: Sri Lanka

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IV. Country Performance and Lending Levels

A. Lending Level Proposed

31. After the performance-based allocation (PBA) exercise, indicative ADF lending of $400 million and OCR lending of $200 million were programmed for 2003-2005, or an annual average of $133 million ADF and $66 million OCR lending. However, the proposed ADF levels are subject to the outcome of the annual PBA exercise each year. The assessment of the country-specific criteria is the basis for triggering a high or low lending scenario each year. The actual blend of ADF and OCR lending to the country will depend on the program composition, availability of ADF resources, and Sri Lanka’s capacity to absorb OCR. The actual financing blend of OCR and ADF will be determined during project formulation.

32. Twelve loan projects are in the pipeline for 2003-2005 (Appendix 1, Table 1.11), of which eight are classified as poverty interventions, including three core poverty interventions. Poverty intervention projects comprise 66.7 percent of total projects and 56.7% of total lending volume for the 3-year period. The proposed program will continue to support the wide-ranging reform agenda in promoting an enabling environment for private sector-led growth. These include investments supporting physical improvements and policy and institutional development in coastal management, rural finance, social and physical infrastructure, and public sector resource management. The concept papers for the pipeline projects are in Appendix 2.

B. Nonlending Program

33. A TA program comprising 16 projects (13 PP, 2 ETSW, and 1 ID) is proposed for 2003- 2005, for a total amount of $11 million (Appendix 1, Table 1.12). This is equivalent to an average of about $3.7 million a year, which is in line with the TA resources available but substantially lower than the actual average of $6.5 million TA provided to Sri Lanka in 1997-2001. Concerted efforts will thus be required to augment TA resources through cofinancing. The TA program is largely focused on project preparatory activities, which emphasize sector development, including policy and institutional support. The country economic review will continue to be prepared annually. The concept papers for nonlending products and services are shown in Appendix 3.

C. Summary of Changes to Lending and Nonlending Program

34. The participatory forestry development project has been removed from the pipeline because of other donor activities and ADB’s ongoing Forest Resources Management Project, which has been extended to 2008. A public sector resource management project is included in 2004. The private sector development subprogram II has been moved from 2003 to 2004 due to the delay in the release of the second tranche. The Colombo port south harbor development project has been moved from 2004 to 2005 because its cofinancing requirement is substantial. The sustainable ecomanagement project, originally scheduled for 2004, has been moved to 2005 but will remain as a standby project for 2004.

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