Sri Lanka and ADB

ADB’s operations in Sri Lanka help address the immediate challenges from the economic crisis and assist in economic stabilization and recovery.

ADB's Work in Sri Lanka

Since early 2022, Sri Lanka has been grappling with balance of payment and debt crises. Foreign exchange reserves have plummeted, inflation has soared, and the local currency has depreciated sharply. Food, medicine, fuel, and other essentials are in short supply. This has led to a catastrophic economic and humanitarian crisis in Sri Lanka that threatens the poverty-reduction progress since the end of civil war in 2009. The economy contracted 7.8% in 2022. The unrest triggered by the crisis led to several changes in political leadership. In September 2022, Sri Lanka reached a staff-level agreement with the International Monetary Fund (IMF) for an Extended Fund Facility (EFF) Arrangement. The EFF was approved by the IMF Board in March 2023.

Sri Lanka is a founding member of the Asian Development Bank (ADB). To date, ADB has committed 482 public sector loans, grants, and technical assistance totaling $11.2 billion to Sri Lanka. Cumulative loan and grant disbursements to Sri Lanka amount to $9.42 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 41 loans and 1 grant worth $3.64 billion.

ADB disbursed $784 million to Sri Lanka in 2022 and committed $200 million in an emergency assistance loan. Technical assistance commitments totaled $1.8 million for new projects and $3 million in supplementary financing for ongoing projects. In response to a request from the Government of Sri Lanka to tackle the food security crisis, ADB provided emergency assistance of $203 million (a $200 million loan and a $3 million grant from the Japan Fund for Prosperous and Resilient Asia and the Pacific).

In 2022, ADB provided a series of interventions as emergency assistance to help address the immediate challenges from the economic crisis in Sri Lanka. The newly approved emergency assistance aims to improve food security and protect the livelihoods of poor and vulnerable people across the country, with a focus on women and children. In addition, ADB repurposed part of its ongoing portfolio to provide working capital support to small and medium-sized enterprises and for essential imports, including food and agriculture products, fertilizer and chemicals, and medical equipment and pharmaceuticals. ADB’s Trade and Supply Chain Finance Program supported 73 transactions valued at $228 million in 2022, including support for essential imports. To address challenges associated with the implementation of ADB’s sovereign projects in Sri Lanka, an emergency trade finance facility was also established.

Photo: Asian Development Bank
Students gain technical skills through the Education Sector Development Program. Photo: M.A. Pushpakumara/ADB

Technical assistance provided in 2022 included $800,000 for Enhancing Small and Medium-Sized Enterprises Financial Services Outreach, and $1 million for Strengthening the Institutional Capacity of the National Water Supply and Drainage Board. The latter aims to improve the institution’s financial sustainability and operational efficiency; and increase its capacity for environmental and social safeguards, climate change and disaster risk management, and gender equality and social inclusion. Supplementary financing of $3 million was provided to support the financial sector, and for the tourism sector.

Nonsovereign operations. Total outstanding balances and undisbursed commitments of ADB’s nonsovereign transactions in Sri Lanka as of 31 December 2022 was $40.87 million representing 0.32% of ADB’s total private sector portfolio.

Operational challenges. Current macroeconomic conditions are having an adverse impact on project implementation. The allocation of counterpart funds from the government is being affected by limited fiscal space. The shortage of foreign exchange has affected imports of construction materials and equipment. Regular portfolio review meetings involving ADB, the government, and executing agencies helped resolve project implementation issues and enhanced the sharing of information. However, institutional factors continue to impede project execution. Among these factors are long land-acquisition procedures, procurement delays caused by cumbersome approval processes, and the poor performance of contractors.

ADB is providing technical assistance to improve project readiness and portfolio management amid the crisis and to build institutional capacity, particularly in Sri Lanka’s new implementing and executing agencies.

 

Knowledge Work

In partnership with the National Planning Department of Sri Lanka, ADB held three events under the Serendipity Knowledge Program (SKOP) for Sri Lanka in 2022. These events were linked to government priority areas that ADB will continue to support over the medium term. The events focused on creating an enabling environment to support public–private partnerships, exploring ways to enhance human capital, and supporting the development of micro, small, and medium-sized enterprises and their access to finance. Two publications were completed under SKOP on energy and climate change. ADB staff produced seven TED-style videos to disseminate knowledge about and lessons from ADB’s operations in Sri Lanka.

Shareholding and Voting Power

Number of Shares Held
61,560 (0.58% of total shares)

Votes
100,674 (0.76% of total membership, 1.16% of total regional membership)

*Overall capital subscription
$819.27 million

*Paid-in capital subscription
$40.98 million

* United States dollar figures are valued at rate as of 31 December 2022.


ADB Governor: Ranil Wickremesinghe
ADB Alternate Governor: K. M. Mahinda Siriwardana
ADB Director: Sangmin Ryu (Republic of Korea)
ADB Alternate Director: Damien Horiambe (Papua New Guinea)
ADB Director’s Advisors: Joo Hyung Son (Republic of Korea) and Hsu-Juan Hou (Taipei, China)

 

Financing Partnerships

Financing partnerships enable ADB’s partner governments or their agencies, multilateral institutions, and private organizations to participate in ADB projects. The additional funds may be in the form of loans and grants, technical assistance, and nonsovereign cofinancing.

Cumulative cofinancing commitments in Sri Lanka:

  • Sovereign cofinancing: $1.8 billion for 43 investment projects and $32.31 million for 43 technical assistance projects since 1972
  • Nonsovereign cofinancing: $5.19 billion for 5 investment projects since 2004

In 2022, Sri Lanka received $100 million loan cofinancing from the Asian Infrastructure Investment Bank for the Health System Enhancement Project, and $275 million loan cofinancing from the World Bank and $3 million grant cofinancing from the Japan Fund for Prosperous and Resilient Asia and the Pacific for the Food Security and Livelihood Recovery Emergency Assistance Project.

 

Future Directions

ADB will align its program for Sri Lanka in 2023 and beyond with the government’s plan, as reflected in the interim budget for 2022 and the budget for 2023, and the key elements of the IMF-supported economic stabilization and recovery program. ADB will support the country’s efforts in stabilizing the economy, providing social protection, meeting other immediate needs, and addressing the fundamental causes of the crisis to lay the foundation for a sustained recovery. The bank will continue support for imports, especially essential items, through the trade and supply chain finance program. ADB will also explore opportunities to actively support private sector development.

This article was originally published in the ADB and Sri Lanka: Fact Sheet. Updated yearly, this ADB Fact Sheet provides concise information on ADB's operations in the country and contact information.

Last updated: 3 May 2023

Contacts

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

Ministry of Finance
The Secretariat, Lotus Road
Colombo 1, Sri Lanka
  Tel: +94 112 484 500
  Fax: +94 112 449 823
E-mail

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