People buy vegetables at a market in Colombo, Sri Lanka, on Dec. 13, 2023.
| Photo Credit: AP
Citing “continued satisfactory progress” in Sri Lanka’s reform programme, the World Bank on Wednesday announced the release of the second tranche of $250 million to the cash-strapped country which will help stabilise the economy.
The World Bank had pledged $500 million in budgetary support and released its first tranche in June to cash-strapped Sri Lanka, which has a total foreign debt of $46.9 billion.
Through the facility known as the Resilience, Stability and Economic Turnaround (RESET) Development Policy Operation (DPO), the World Bank release was made “considering the continued satisfactory progress made by the government with the reform programme.” The RESET DPO, which provides budget support to the government, was originally approved in June this year, it added.
Sri Lanka was hit by its worst economic crisis in history in 2022 when its foreign exchange reserves fell to a critical low and the public came out on the streets to protest the shortage of fuel, fertilisers and essential commodities.
It prompted Sri Lanka to go for what the World Bank described as “foundational reforms” to restore macroeconomic stability, and mitigate the impacts on the poor and vulnerable aided by private sector-led recovery.
The second tranche was released after assessing that the government continues to make satisfactory progress in carrying out the broader reform programme, including enacting the Banking (Special Provisions) Act, aimed at strengthening the deposit insurance and problem bank resolution framework.
“Continued momentum on economic and structural reforms is critical not only to stabilise the economy but also to unleash its potential for private sector-led growth and transformation,” said Faris H. Hadad-Zervos, World Bank Country Director for Maldives, Nepal.
“We have coordinated and sequenced all our support with the International Monetary Fund (IMF), the Asian Development Bank (ADB), and other development partners,” the World Bank said.
Last week, Sri Lanka won the International Monetary Fund (IMF) board approval for the second tranche of the $2.9 billion.
The first tranche of World Bank’s $250 million was released in June upon the completion of seven reforms across three pillars: economic governance; growth and competitiveness; and protecting the poor and vulnerable.
The reforms mandated by the IMF have proved to be politically unpopular for President Ranil Wickremesinghe. He has appealed to all political parties to act with responsibility and not make political capital out of tough reforms needed to turn around the island’s bankrupt economy.
The government is expecting around $330 million as the second tranche of the $2.9 billion 4-year IMF bailout after the first one came in March this year.
