- Friday, February 28, 2025
The approved financing includes $500 million for budgetary support and $200 million for social security.
By: Shubham Ghosh
THE World Bank has approved a significant financing package of $700 million (£554.3 million) to aid Sri Lanka in recovering from its ongoing economic crisis and providing relief to the most vulnerable populations.
The funding marks the largest tranche since the International Monetary Fund (IMF) deal reached in March. Sri Lanka has been grappling with its worst economic downturn in history, with a contraction of over seven percent in 2022 and widespread protests leading to the removal of the powerful Rajapaksa family from politics.
The approved financing includes $500 million (£395.9 million) for budgetary support and $200 million (£158.3 million) for social security.
It represents a major relief package for Sri Lanka since the IMF’s Extended Fund Facility of $2.9 billion (£2.29 billion). The World Bank’s aim is to assist Sri Lanka in implementing foundational reforms that restore macroeconomic stability, mitigate the impact of shocks on the poor and vulnerable, and foster an inclusive and private-sector-led recovery.
The World Bank’s Country Partnership Framework (CPF) for Sri Lanka, discussed by the board of directors, aligns with the country’s need for economic and financial sector stability, as well as a green, resilient, and inclusive recovery. Sri Lanka’s poverty rate has surged, with an estimated doubling from 13.1 per cent to 25 per cent between 2021 and 2022, adding 2.5 million people to the ranks of the poor. It is projected to increase by another 2.4 percentage points in 2023.
Faris H Hadad-Zervos, World Bank country director for Sri Lanka, emphasised the unprecedented nature of the crisis and the opportunity it presents for profound reforms to reshape the country’s economic narrative. The CPF supports this shift by focusing on economic stabilisation, structural reforms, and protection of the poor and vulnerable.
“The extent of the crisis in Sri Lanka is unprecedented, but offers a historic opportunity for deep reforms to reset the country’s economic storyline,” he said.
Shalabh Tandon, acting regional director for IFC South Asia, stressed the importance of a robust private sector in the island-nation in overcoming the crisis and providing job and livelihood opportunities to rebuild lives affected by the economic downturn.
(With agency inputs)
