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p. 85 of 95 BACK | NEXT Message from the Chairman of the Board of Directors Members, Capital Stock and Voting Power The Record Abbreviations 2004 in Review: Board of Directors' Report Special Theme: The Changing Face of the Microfinance Industry: Building Financial Systems for the Poor Part 1: Institutional Effectiveness Part 2: Poverty Reduction Strategic Priorities Thematic Priorities Regional Perspectives East and Central Asia Mekong The Pacific South Asia Afghanistan Bangladesh Bhutan India Maldives Nepal Pakistan Sri Lanka Southeast Asia Part 3: Financial Statements: Management's Discussion and Analysis

Annual Report 2004 : Part 2: Poverty Reduction : South Asia

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Sri Lanka

Strategy and Policy Dialogue. The CSPU for 2005–2006 was prepared, but the new government elected in April 2004 adopted different policies in a number of areas and sectors. As a consequence, it became necessary to reassess ADB operations in light of the new priorities which place greater emphasis on the development of rural and peripheral areas and on poverty reduction but less emphasis on private sector-led economic growth.

The 2004 CSP followed the poverty partnership agreement signed in March 2002 and focused on private sector development, governance, and reducing poverty related to conflict. ADF lending was mainly directed to the education and the transport sectors. Technical assistance also supported private sector development, transport and infrastructure development, and conflict-affected communities. A macroeconomic assessment covering progress in economic reforms and analyzing the country's debt sustainability wascarried out to inform and strengthen the CSP and policy debate.

The 26 December tsunami struck more than 1,000 kilometers (two thirds) of Sri Lanka's coastline. Coastal infrastructure (roads, railway, power, telecommunications, water supply, and fishing ports) was significantly affected; the overall loss of assets has been estimated at 4.4% of GDP with reconstruction costs rising to $1.5 billion or 7% of GDP. Given its concentration on the northern and eastern coastal areas, the tsunami affected a disproportionately large share of the poor engaged in fishing, subsistence agriculture, and small-scale trading. The human impact, in terms of lives lost and livelihoods and families destroyed was staggering, and there is a real possibility that poverty will become further entrenched if the already disadvantaged do not benefit from the reconstruction program and do not regain the means to support themselves.

Norwegian-led efforts at restarting peace talks, stalled since April 2003, were not successful, but all parties involved remain committed to maintaining the cease-fire. ADB continued to implement conflict-sensitive programs and projects and was actively involved in the formulation of guiding principles for tsunami aid that stress the importance of the "do no harm" principle and of conflict awareness.

Loans and Technical Assistance. Eight loans totaling $195.0 million were approved for five projects. The projects aim to modernize secondary education, to develop the road sector, to continue support for postconflict restoration and development in the northeast, to strengthen fiscal management, and to support financial markets for private sector development. Four technical assistance grants totaling about $4.0 million were also approved including $1.7 million for strengthening the domestic debt market and $1 million for preparing a road sector master plan. A grant from the JFPR for $1.5 million was also approved for the power fund for the poor.

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