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Sri Lanka and ADB

ADB is assisting Sri Lanka’s economic recovery from COVID-19 and supporting the country’s inclusive and sustainable development through investments in key sectors.

Emergency Assistance to Sri Lanka

Sri Lanka is currently facing severe economic crisis, which has brought upon unprecedented hardships on the population, especially the poor and vulnerable including women and children. The economic fallout from the balance of payment and debt crises has resulted in shortages of essential items such as fuel, food, fertilizer, cooking gas and medicines.

To support the country during difficult times, ADB repurposed funds from existing projects and is helping the import of essential items (medicines, chemical for water treatment, and fertilizer), financing support for small and medium-sized enterprises, and livelihood development in the agriculture sector. ADB also approved an emergency assistance loan of $200 million, in addition to administering a $3 million grant from the Japan Fund for Prosperous and Resilient Asia and the Pacific (JFPR), to improve food security and livelihoods of the poor and vulnerable, especially women and children.

Working together with its partner banks, ADB’s Trade and Supply Chain Finance Program is also supporting import of essential items in the country.

ADB is working closely with other development partners, including the Asian Infrastructure Investment Bank, the World Bank, and the United Nations, as it responds to the country’s needs in the time of crisis. Read the ADB/AIIB/WB Joint Statement

As a longstanding development partner of Sri Lanka, how is ADB supporting the country and the people of Sri Lanka to mitigate hardships caused by the crisis?

Sri Lanka is a founding member of the ADB in a partnership spanning 56 years. In that time, ADB has supported Sri Lanka’s development through many transitions. This is yet another situation in which ADB has stepped in to assist the country at a time of need. Considering the current economic crisis, ADB has repurposed ongoing loans for the purchase of medicines, fertilizer, water treatment, working capital support to SMEs, and cash transfers for the most poor and vulnerable, as it remains committed to the people of Sri Lanka and to supporting the country to respond to the economic crisis.

Could you shed some light on the volume of emergency assistance provided to Sri Lanka in response to the economic crisis? What are the areas that have been supported?

In September, ADB provided a loan of $200 million to provide provide much-needed financing to ensure access to food and protect livelihoods of the poor and vulnerable during the unprecedented economic crisis that Sri Lanka is facing right now. The assistance will provide crucial support to the Government in extending assistance to vulnerable groups and restoring the livelihood of the poor and vulnerable, including farmers. The assistance will expand direct financial support for the poor and vulnerable while boosting livelihood development activities and agricultural production and enhancing social protection systems.

In addition to this loan, ADB has been addressing immediate needs, such as essential medical supplies, materials for water treatment, and working capital for small and medium-sized enterprises by reallocating surplus loan proceeds from ongoing loans.

How is ADB supporting Sri Lanka to ensure supply of basic essentials is maintained?

Working closely with other development partners such as the AIIB, UN and the World Bank, ADB is providing support to the country in the sectors that ADB has been working in over the past few years such as agriculture, health, water and SMEs, and according to the needs and the gaps to ensure that the basic essentials are maintained for the people.

Due to shortage of foreign exchange, Sri Lankan businesses are facing constraints in accessing foreign exchange. How has ADB supported businesses with trade finance for import of essential items and goods for economic activity?

Following the economic crisis in April 2022, ADB trade and supply chain finance program (TSCFP) continues to serve the Sri Lankan market albeit in a reduced capacity by providing credit guarantees to support the import of essential commodities such as food, fuel, fertilizers, seeds, medicines etc. Since April 2022 the TFP has supported approx. $20 million of transactions for such essential goods.

How will ADB ensure that the assistance goes to the most vulnerable and the targeted beneficiaries?

ADB supports the establishment of improved information, monitoring, and reporting systems at the national and local levels for emergency cash assistance being provided to the poor and vulnerable people. This includes regular detailed reporting on all beneficiaries receiving the assistance and upgrading of IT systems to facilitate detailed reporting and monitoring. ADB also supports stakeholder information and communication activities on the emergency cash assistance and the improvement of grievance redress mechanisms associated with the assistance.

Sri Lanka has reached a staff-level agreement with the IMF, will ADB provide Sri Lanka with new loans or bridge financing?

ADB is closely monitoring the country situation, including the needs for economic stability and recovery. ADB is also closely coordinating with the government, the IMF and other development partners to determine the appropriate time and form of new assistance.

How does ADB's Trade and Supply Chain Finance Program (TSCFP) work?

The Trade Finance (TF) business of ADB's Trade & Supply Chain Finance Program (TSCFP) fills market gaps for trade finance by providing guarantees and loans to banks. TF continues to grow, supporting billions of dollars of trade throughout the region, which in turn helps create sustainable jobs and economic growth in Asia’s developing countries. This video helps explain the working of the TFP.

In 2021, TSCFP’s trade finance business supported 6,800 transactions worth a total of $8 billion, including $5.4 billion in co-financing, and helped 2,858 small and medium-sized enterprises, and 2,300 trades between developing Asia countries.

What does TSCFP do in Sri Lanka?

In 2021, TFP supported $1.26 billion in trade activities in Sri Lanka, representing about 6% of Sri Lanka’s total imports. Following the economic crisis in April 2022, ADB TSCFP continues to serve the Sri Lankan market albeit in a reduced capacity by providing credit guarantees to support the import of essential commodities such as food, fuel, fertilizers, seeds, medicines etc. Since Apr 2022 the TFP has supported approx. USD 20M of transactions for such essential goods.

How does ADB's Trade and Supply Chain Finance Program (TSCFP) work?

Given the unprecedented economic crises ensuing in Sri Lanka, ADB has repurposed funds from existing projects to support the country during difficult times. Some of these repurposed funds are directed towards helping the import of essential items (medicines, chemical for water treatment, and fertilizer). However local importers are faced with challenges in opening Letters of Credit and getting international banks to confirm such letters of credit.

In response to this issue, ADB Sovereign operations in Sri Lanka and TSCFP have collaborated to repurpose portions of their existing portfolio and guarantee products to support an emergency trade finance facility (ETFF). The ETFF is an innovative structure that combines ADB sovereign and private sector operations to assist the country to procure essential imported goods such as medical supplies, fertilizers, and pharmaceuticals and mitigate the impact on the people. The Trade Finance Program is the vehicle facilitating the import transactions of the essential goods by providing guarantees.

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Emergency response

Support provided for targeted cash transfers, and livelihood development and support program for poor and vulnerable

Amount disbursed: 171.5 million

Geographic areas impacted: Island-wide

Beneficiaries:

  • 2.4 million low-income families, including 1.4 million low-income elders, people with disabilities, and kidney disease patients
  • Approx. 300,000 pregnant and lactating women and malnourished children under 2 years of age
  • Approx. 18,000 vulnerable children, women, elders, and people with disabilities in shelters and care
  • Livelihood development program for approx. 75,000 low-income families

Support provided for import of fertilizer / agricultural inputs, and for the capacity building program for agribusiness for farmers

Amount disbursed: $39.8 million

Geographic areas impacted: Island-wide

Beneficiaries:

  • 40,000 MT of MOP fertilizer will be distributed among about 1 million farmers for the Maha 2022-2023 season, including cash assistance impacting 600,000 farmers.
  • Capacity building for good agricultural practices impacting about 150,000 farmers out of which 45,000 will be female farmers
  • Agricultural support for about 15,000 farmers in Mahaweli system for the cultivation of maize, chili, soya beans, big onion and production of eggs
  • Approximately 1,200 female headed farmer families will get polytunnels and inputs for poultry eggs production.

Support provided for the import of essential medicine and medical items and equipment

Amount disbursed: Yet to be disbursed

Geographic areas impacted: Island-wide

Beneficiaries:

  • Support provided to all primary, secondary, and sometimes tertiary hospitals across the country to address the urgent need of essential pharmaceuticals and medical supplies
  • 700 health institutions and hospitals to benefit from the co-financing with AIIB

Support provided for procurement of chemicals for water treatment and materials to enable water connections in houses

Amount disbursed: Yet to be disbursed

Geographic areas impacted: Island-wide

Beneficiaries:

  • Approximately 2 million families provided safe drinking water, half of whom are female
  • Approximately 50,000 families benefit from new water connections

Support provided for MSMEs’ and SMEs’ working capital needs in critical sectors such as tourism, agriculture, and other export-oriented industries. Participating banks are: Bank of Ceylon, Regional Development Bank, Commercial Bank of Ceylon, Sampath Bank, Hatton National Bank, NDB Bank, Seylan Bank, Nations Trust Bank.

Amount disbursed: 13.5 million

Geographic areas impacted: Island-wide

Beneficiaries:

  • Working capital to support approximately 930 SMEs, with approximately 150 SMEs run by women

Support for the private sector through the Trade and Supply Chain Finance Program that provides guarantees to banks to facilitate trade with Sri Lanka

Geographic areas impacted: Island-wide

Beneficiaries:

  • In the last 18 months, this program has supported $75m of import of staple food, fertilizer, and animal feed, all critical for Sri Lankan farmers and food security.
  • In 2022 alone, goods include corn, urea (fertilizer), coconut oil, milk, cattle feed and blended fat for poultry use.
  • ADB is also looking to provide direct USD assistance to Sri Lankan agribusinesses for the import of wheat, fertilizer, and other essential commodities.

Fast Facts

$0 million

total amount disbursed

$0 million

total import of essential items supported under trade and supply chain finance program

Contact

Sri Lanka Resident Mission
23, Independence Avenue
Colombo 7, Sri Lanka
  Tel: +94 11 267 4499
  Fax: +94 11 267 4488
 Email