ADB on track for reforms-based funding for Sri Lanka

The Asian Development Bank (ADB) has linked the funding of programmes in Sri Lanka based on the reforms progress as the development agency insists that the timeline on reforms need be followed.

The ADB's Country Director Takafumi Kadono addressing the launch of the ADB Sri Lanka Country Partnership Strategy 2024-2028 "Serendipity Knowledge Program" (SKOP) in Colombo on Wednesday said that the ADB's programme to provide budget support of about US$300-400 million per year will be based on the progress made in reforms.

Commenting on the progress of the reforms carried out by the government, Mr. Kadono said, "We do see good progress" but insisted that many reforms are not easy and that the due process needs to be followed and timelines need to be followed as well.

He noted that the authorities should persevere with the reforms and explained that the Country Partnership Strategy (CPS) is aimed at helping Sri Lanka come out of the crisis.

It was pointed out that there needs to be realistic expectations when working on these reforms adding that continuous public support was vital for reforms.

These reforms are absolutely needed by the country to get onto a strong sustainable path, he said.

The CPS has identified key areas of concern that need to be worked on pointing out the high incidence of corruption in the country; weak public finance management; limited private sector participation; weak STEM education; economic mismatch; gender inequality; and climate change risks and vulnerabilities.

Mr. Kadono explained that there needs to be public outreach by the government as many citizens still do not feel that economic progress in their daily life.

"There is a strong commitment by the government," he said adding that they are pressured to move faster. Reforms are "absolutely needed" by the country to get onto a sustainable path, he added.

The CPS will support the country's efforts to tackle the key underlying causes of the crisis. ADB will focus on reforming public financial management system, strengthening governance, accelerating domestic resource mobilisation, and improving fiscal and debt sustainability, as well as measures to improve the performance of state-owned enterprises.

During 2024-2028, ADB operations in Sri Lanka will focus on strengthening public financial management and governance, fostering private sector development promoting green growth, and improving access to climate-smart public services and deepening inclusion.

In this respect the government needs to prioritise on restoring fiscal and debt sustainability, and build reserves. It should ensure financial sector stability and sustainable finance; support private sector development including PPPs and SMEs. The government must also reform SOEs; strengthen social safety nets; improve education and health outcomes; achieve nationally determined contribution targets on climate and promote renewable energy; and modernise agriculture. In addition it should enhance governance and reduce corruption vulnerabilities; and develop the digital economy.