ADB lending to go up 50 percent:
Confidence of international community very high
July 23 (Bloomberg) The Asian Development Bank plans to increase its
lending to Sri Lanka by 50 percent to help rebuild it after ending its
The Manila-based lender plans to raise Sri Lanka’s annual allocation
to $300 million in 2010 from $200 million, to fund road, power and water
and sanitation projects in the island’s north and east, among others,
said Narhari Rao, the ADB’s South Asia lead economist.
“Sri Lanka is in an extremely favourable situation and the overall
confidence of the international community is much higher,” Rao said in
an interview in Colombo. “We are trying to push ahead on various fronts
since we feel it’s just the right time to give resources to Sri Lanka.”
President Mahinda Rajapaksa is seeking aid and investments to help
turn the East and North into productive parts of the economy after
defeating the LTTE.
The International Monetary Fund this week said it reached a
staff-level agreement for a $2.5 billion standby loan for Sri Lanka to
rebuild its economy and replenish international reserves.
Rao said the ADB’s Board may also this year approve a $300 million
“special facility” to Sri Lanka to help it better face the global
recession and set up a $20 million fund in 2011 to support
The Central Bank of Sri Lanka this month raised its 2009 growth
forecast for Sri Lanka to as much as 4.5 percent from an earlier
estimate of 2.5 percent. Gross domestic product expanded 1.5 percent in
the first quarter from a year earlier, the slowest pace in at least six
years. The nation’s reserves declined by more than more half in the six
months from September to as little as $1.4 billion as the global
recession hurt export earnings, prompting Sri Lanka to start talks with
the IMF in March. Foreign reserves stood at $1.705 billion as of July
20, according to the Central Bank.
Rao said Sri Lanka could increase its rate of economic growth to at
least 7 percent in the next year or two, “contingent on the global
He said the nation could contain its budget deficit to 7 percent of
GDP in 2009, as forecast by the Central Bank, and narrow the gap to a
“more sustainable” level of 5 percent as the economy picks up.
“With the fiscal deficit brought under control and foreign reserves
being built up, there’s absolutely no reason Sri Lanka can’t attract
more investment and the private sector gain more access to funds,” Rao