ADB $100M Loan to Improve Sri Lanka's Neglected Wastewater System

MANILA, PHILIPPINES - Around 1.5 million residents in Colombo, Sri Lanka’s economic and administrative center, will benefit from a large-scale wastewater management project funded by the Asian Development Bank (ADB).

ADB's Board of Directors approved a $100-million loan package for the project, including $80 million from its ordinary capital resources (OCR) and $20 million from its concessional Asian Development Fund (ADF). The Sri Lanka Government will cover the remaining cost of $16.6 million.

The project has three components. The first involves the upgrading of sewerage infrastructure in Colombo. The second component will strengthen the capacity of the government and the municipal service provider, Colombo Municipal Council (CMC), to manage the assets and finances of the sector, monitor operations, ensure environmental regulatory compliance, and provide customer service. The last component will support project management and implementation.

"The public sewerage network in Colombo needs to catch up with the capital's rapid expansion. As a first step, the existing system needs urgent rehabilitation," said Gyongshim An, Urban Development Specialist of ADB's South Asia Department. "Basic infrastructure and services, including wastewater management, play a critical role in sustaining the national economy and improving the quality of life in the Greater Colombo area."

Colombo's existing public sewerage system is old, limited in coverage, and plagued with technical, financial, managerial, and operational constraints and problems.

To prepare the groundwork for the project, ADB provided a $500,000 grant and another $150,000 from the Multi-Donor Trust Fund under ADB's Water Financing Partnership Facility. The technical assistance focused on developing the capacity of the CMC, to plan, implement, and monitor the project.

The OCR loan carries a 25-year term, including a grace period of 5 years, and interest rate based on ADB's LIBOR-based lending facility. The ADF loan has a 32-year term, including an 8-year grace period, and an interest rate of 1% per annum during the grace period and 1.5% during the amortization period.