Sri Lanka doubles efforts of mobilising foreign financing

Burdened with heavy debts and facing a financial crisis triggered by COVID-19, Sri Lanka is doubling its efforts of mobilising foreign financing while placing high priority to implement strategic development initiatives, according to a new government’s policy framework document.

The government has made arrangements to mobilise foreign financing of US$628.6 million by entering into three agreements with foreign development partners and lending agencies from January 1 to April 30, 2020 to support the Public Investment Programme (PIP).

It will be able to finance its maturing external debt in 2020 through loan disbursements from bilateral and multilateral agencies, apart from the sovereign bond obligation that is due, which will be met out of reserves, official sources said.

The external financing will represent a significant share of the public investment as domestic financial resources are hardly adequate to meet the resource requirement of the country.

The share of outright grants and concessional financing in the foreign financing basket has been reduced, official data showed.

A sum of US$500 million of Foreign Currency Term Financing Facility (FCTFF) has been extended by the China Development Bank for budget support and $128.6 million provided by the World Bank to be utilised for the COVID- 19 Emergency Response and Health Systems Preparedness Project.

According to official data, total foreign financing disbursements made during the period from January 1 to April, 30, 2020 amounted to $869.8 million of which $869.7 million was disbursed as loans while $ 0.1 million was disbursed by way of grants.

The majority of the disbursements were from the loan agreements signed with China, which is almost 65 per cent, followed by Asian Development Bank (11 per cent), World Bank ( 9 per cent) and Japan ( 8 per cent).

Other than the $ 500 million obtained as budget support loan, the majority of the disbursements were in lieu of the projects implemented under the roads and bridges sector accounting for almost 14 per cent of the total disbursements.

This will be followed by the water supply and sanitation sector ( 8 per cent), ground transport sector ( 7 per cent), power and energy sector (3 per cent) and disaster management (3 per cent).