The Asian Development Bank (ADB) has approved a $350 million special policy-based loan to provide budget support to Sri Lanka for economic stabilization today (29).

In a statement, the ADB said the program is part of a broader package of financial assistance anchored by the International Monetary Fund’s Extended Fund Facility for the country, which aims to stabilize the economy and lay the foundation for economic recovery and sustained growth.

Sri Lanka is facing a severe and unprecedented economic crisis. High inflation has eroded purchasing power, livelihoods have been affected, and past development gains have been reversed, it added.

“ADB is concerned about the deep crisis in the country and its impact on the people of Sri Lanka, especially the poor and the vulnerable, particularly women,” said ADB President Masatsugu Asakawa. “ADB is committed to standing with Sri Lanka as it addresses its present challenges and strides toward economic stabilization, sustainable recovery, and inclusive growth.”

Sri Lanka has embarked on bold reforms to address the causes of both internal and external imbalances and return to a sustainable debt trajectory. The country faces a long road to recovery and must remain steadfast in the implementation of necessary reforms, which include enhancing tax revenue collection, strengthening public financial management, improving the performance of state-owned enterprises, ensuring autonomy and independence of the central bank, safeguarding financial sector stability, and bolstering governance frameworks, according to the ADB.

As these measures are implemented, it is essential to ensure that adequate social protection is provided. Implementing governance reforms and anticorruption measures will be critical, it said.

Transparency and open communication will be crucial in building agreement around the reforms. ADB will proactively engage with the government, other stakeholders, and development partners to help address structural impediments and plan future support.

ADB has supported Sri Lanka’s response throughout the crisis, the ADB mentioned, adding that in 2022, in close coordination with development partners, ADB provided emergency assistance to support basic services and sustain livelihoods. 

ADB repurposed $334 million of existing loans as an emergency response to support the import of essential items such as fertilizer, medicines, chemicals for water treatment, working capital for small and medium-sized enterprises, and cash transfers to the poorest and vulnerable. Trade finance lines through ADB Trade and Supply Chain Finance Program supported the import of essential items during the crisis.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region, it added.