MANILA: The Asian Development Bank (ADB) has granted a $350 million loan to cash-strapped Sri Lanka, providing support as the country grapples with its severe economic crisis. The loan aims to stabilize Sri Lanka’s economy, which has been facing significant challenges after running out of foreign currency and defaulting on its $46 billion debt over a year ago.
The ADB, headquartered in Manila, expressed its commitment to assisting Sri Lanka in overcoming its present difficulties and working towards economic stabilization, sustainable recovery, and inclusive growth.
ADB President Masatsugu Asakawa emphasized the importance of transparency and open communication in building consensus around the necessary reforms, particularly with regard to the privatization of state enterprises as outlined in Sri Lanka’s plans.
This loan follows the disbursement of $330 million by the International Monetary Fund (IMF) two months ago, marking the initial installment of a $2.9 billion, four-year bailout package that is contingent upon Sri Lanka implementing significant reforms. The IMF recently urged Sri Lanka to expedite its debt restructuring process, warning that any delays could hinder efforts to address the country’s financial woes.
Sri Lanka’s Economic Crisis
Last year, Sri Lanka experienced severe shortages of essential commodities such as food, fuel, and medicines, leading to widespread public unrest and protests that ultimately resulted in the ousting of former President Gotabaya Rajapaksa in July. The new government has implemented measures such as tax increases, the elimination of energy subsidies, and the proposed sale of state-owned enterprises to generate revenue.
China, Sri Lanka’s primary bilateral creditor, initially resisted debt restructuring and instead offered additional loans to repay old debts. Of the total foreign credit owed by Sri Lanka, over $14 billion is in bilateral debt to foreign governments, with 52 percent attributed to China. China initially suggested a two-year moratorium on debt repayments without accepting a reduction in the outstanding amount, which fell short of the IMF’s expectations.
The specific terms of China’s debt restructuring plan have not been publicly disclosed. The combined assistance from the ADB and IMF aims to alleviate Sri Lanka’s economic challenges and facilitate the country’s path to recovery.
