ADB's Work in Sri Lanka   Download Country Brief

Sri Lanka’s economy showed an uptick in the first half of 2021, but a subsequent surge in coronavirus disease (COVID-19) cases and mobility restrictions hindered a stronger recovery. Gross domestic product (GDP) growth in 2021 clocked 3.7% after a contraction of 3.6% in 2020. Before the pandemic, GDP annual growth averaged 3.7% from 2015 to 2019 as the economy was hit by shocks, including disasters caused by natural hazards, a political crisis, and terror attacks.

To date, the Asian Development Bank (ADB) has committed 479 public sector loans, grants, and technical assistance totaling $11 billion to Sri Lanka. Cumulative loan and grant disbursements to Sri Lanka amount to $8.64 billion. These were financed by regular and concessional ordinary capital resources, the Asian Development Fund, and other special funds. ADB’s ongoing sovereign portfolio in Sri Lanka includes 46 loans and 2 grants worth $4.4 billion.

ADB’s technical assistance program for Sri Lanka in 2021 included support for the implementation of education reforms, including capacity building in the sector that will enable quick and flexible responses to future emergencies. The technical assistance program also supported interventions to improve energy efficiency and increase the use of renewable energy.

ADB maintains close coordination with bilateral and multilateral development partners including the International Monetary Fund, the United Nations, and the World Bank to ensure complementarity of support to Sri Lanka.

Nonsovereign operations. Total outstanding balances and undisbursed commitments of ADB’s nonsovereign transactions in Sri Lanka as of 31 December 2021 was $368.43 million representing 2.62% of ADB’s total private sector portfolio.

Operational challenges. COVID-19 remains a challenge to ADB project implementation by preventing field missions and slowing work at some project sites. In 2021, ADB continued to monitor the implementation of projects through virtual missions, and work continued without significant interruptions. Institutional factors continued to hinder project implementation. These included lengthy land acquisition procedures, procurement delays caused by cumbersome approval processes, limited availability of counterpart funding, and poor contractor performance. Meanwhile, current macroeconomic conditions are affecting imports of construction material. Regular portfolio review meetings, involving ADB, the government, and executing agencies, helped resolve project-implementation issues and fostered information sharing. Through technical assistance, ADB is helping to improve project readiness and portfolio management, and build institutional capacity, particularly in Sri Lanka’s new implementing and executing agencies.

Hakmana Methodist Central College student reads at the school library. Photo: Pushpa Kumara/ADB

COVID-19 Response

In 2021, ADB disbursed $684 million to Sri Lanka and committed $460 million in project lending. The technical assistance commitments totaled $3.95 million. ADB continued to provide support to strengthen the government’s response to COVID-19 pandemic, approving a $150 million loan to procure vaccines, strengthen the health information system, and build capacity for disease surveillance. An additional $110 million was approved to support an ongoing health project that was supported by an initial $50 million loan. The additional loan will fulfill a financing gap created by the reallocation of funds for COVID-19 interventions and scale up primary and secondary health care in certain provinces, improve the Government of Sri Lanka’s response capacity to COVID-19, and support e-learning in the health sector. The $200 million third tranche of a multitranche financing facility will upgrade and maintain rural roads to help advance rural economic and social development.

Knowledge Work

ADB launched a new knowledge program for Sri Lanka in 2021—the Serendipity Knowledge Program (SKOP) to promote knowledge sharing on economic and development issues affecting Sri Lanka and provide a platform for stakeholders to discuss these issues. SKOP covers knowledge products and events. It will be aligned with the country priorities identified in the country partnership strategy (CPS) for Sri Lanka, 2023–2027 that is being formulated. The first knowledge event under SKOP was held in October 2021 on integrated rural development with discussions on key rural development challenges and solutions from the experiences of Sri Lanka and other countries.

  ADB Projects in Sri Lanka Project data sheets for loans, grants, TAs

Future Directions

ADB’s assistance will focus on macroeconomic management to ensure debt sustainability, fostering private sector development, rural development, skills development, small and medium-sized enterprises, social protection, and renewable energy, among others. ADB will provide sovereign and nonsovereign investments, capacity building, and knowledge to help Sri Lanka recover from the COVID-19 pandemic and lay a strong foundation for inclusive and sustainable development. ADB’s investments and knowledge work aim to strengthen the country’s growth drivers by promoting economic diversification, supporting human capital development, enhancing productivity, and fostering inclusiveness to improve the quality of growth.

In consultation with the government, ADB is preparing a new CPS for Sri Lanka, 2023–2027 that will support post-pandemic recovery and address constraints to growth. The knowledge plan under the new CPS will guide ADB’s knowledge support to the country.