ADB $70M Road Loan to Help Sri Lanka Revitalize Lagging Provinces

News Release | 16 September 2009

MANILA, PHILIPPINES - The Asian Development Bank (ADB) is providing a $70 million road rehabilitation loan to support Sri Lanka's drive to revitalize its eastern and north central provinces. The country's eastern province has suffered from years of civil conflict, while its north central province, which borders the former conflict areas, has lagged other parts of the country in terms of development.

The loan, from ADB's concessional Asian Development Fund, will fund the upgrade of 370 kilometers of roads in the two provinces, as well as rebuild and replace bridges. A technical assistance grant of $800,000 will help boost the capacity of provincial agencies managing and maintaining roads, supporting the central government's move to devolve these responsibilities to the local level.

"The project roads serve some of the poorest provinces in the country and improving the network will increase the availability and frequency of transport services, improve access to markets and social services, and boost livelihood opportunities, including for internally displaced people," said Sri Widowati, Head of the Project Administration Unit in ADB's South Asia Department.

Sri Lanka's prolonged civil conflict has devastated infrastructure in much of the east and north of the country, forced thousands of people to flee their homes, and caused wide income gaps with the rest of the country. The government's long-term development plan is to help the region redevelop and integrate into the wider economy, and the recent end to hostilities provides an opportunity to push ahead with its program.

Along with reducing travel times, cutting transport costs, and providing new economic opportunities for remote communities, the project will also help revive tourism in an area with beaches and heritage cities that have been extremely popular with foreign visitors in the past.

Given the sensitivity of working in areas that have been consumed by conflict and ethnic tensions in the past, the project has been prepared with the involvement of a broad range of stakeholders and beneficiaries.

"The project has been carefully designed to ensure that the benefits are spread equitably between the different groups and districts in the two provinces," said Richard Vokes, ADB's Country Director for Sri Lanka.

Since 1980, ADB has extended 12 loans totaling $591 million for the road sector in Sri Lanka, and the project is part of ongoing collaboration with World Bank and Japan International Cooperation Agency to upgrade and develop the country's roads.

ADB's 32-year loan, which makes up almost 90% of the total project cost of $78 million, has an 8-year grace period with an annual interest charge of 1%, rising to 1.5% for the balance. The government is financing project taxes and duties of $8 million. The project is due for completion in December 2013.