Press Releases
Strengthening Sri Lanka – Thailand Development Cooperation through Neighbouring Countries Economic Development Cooperation Agency (NEDA) & Thailand International Cooperation Agency (TICA)
A delegation of NEDA comprising Mr. Rappipat Promnart, Director of Policy and Planning Bureau & Mr. Wasit Anuntavichien, Policy and Planning Analyst of the Neighbouring Countries Economic Development Agency (NEDA) visited Sri Lanka during April 09 -10, 2024. The delegation who arrived at the request of ERD, met Mr. Ajith Abeysekera, Director General, Department of External Resources (ERD) and other Treasury Officials on the 09th of April, 2024. This meeting was a stepping stone to embark on a promising future collaboration between Thailand and Sri Lanka in terms of development cooperation.
Commenting on the longstanding cultural ties between Thailand Sri Lanka, the Director General of ERD, welcomed the NEDA’s Technical & Financial Assistance. Further, the Director General, mentioned about the potential NEDA support for the Sri Lanka’s proposed Public Debt Management Office (PDMO). Mr. Rappipat Promnart, Director of Policy and Planning Bureau warmly welcomed the proposal and invited around 20 officials from the potential officers who will be engaged in working with the proposed PDMO, to visit Thailand Debt Management Office during October/ November. Moreover, the delegation expressed their willingness to extend soft loans with indicative terms and conditions to priority sectors in Sri Lanka. The Department of External Resources pointed out the necessity to have further discussion on the proposed terms and conditions of the loans, such as procurement of at least 50% of goods and services from the Thailand and also highlighted the present challenges emanating from the ongoing debt restructuring process of Sri Lanka.
Further, ERD emphasized the importance of obtaining NEDA support in terms of investment & projects in the PPP modality. It was agreed to discuss these matters in depth in the coming months. Additionally, Director General of Department of National Planning explained the strategic direction of public investments in Sri Lanka. Last but not least, DG, ERD reiterated the importance of continuing these partnership and the commitment of the Government of Sri Lanka to foster and sustain such relationships which will derive mutual benefits for both parties.
Further, Government of Sri Lanka is closely working with the Thailand International Cooperation Agency (TICA) at present with regard to the Two Year Implementation Plan between Thailand and Sri Lanka for 2023 – 2024 for the priority sectors such as Community Based Tourism, small industries development, marine ornamental fish breeding and capacity building programmes for Government officials in Sri Lanka.
Department of External Resources
Ministry of Finance, Economic Stabilization and National Policies
Colombo 01
On April 10, 2024.
Financing of USD 100 million from the Asian Development Bank to boost Small and Medium-sized Enterprises (SME) of Sri Lanka
Since 2015, the Government of Sri Lanka engaged in discussions with the Asian Development Bank (ADB) to mobilize necessary financial assistance amounting to USD 452.5 million to support the Small and Medium – Sized Enterprises (SMEs) of the country.
Accordingly, the original credit line of USD 100 million, which is a financial intermediation loan through 10 participating financial institutions (PFIs) to eligible SME subprojects became effective in April 2016. The loan was financially closed in January 2019, 1.5 years earlier than the initial plan. It had exceeded development targets on reaching out to underserved SMEs, including women-led, first-time borrowers, and those located outside Colombo. Considering the high demand from the sector, an additional USD 75 million (the first additional financing) and a USD 9.5 million grant (the second additional financing) from We-Fi were mobilized in 2018 as further assistance to the sector.
In November 2020, the Government of Sri Lanka entered into loan and grant agreements with ADB to obtain another loan of USD 165 million and grants worth of USD 3 million from the Japan Fund for Poverty Reduction (JFPR), to provide further assistance as a credit line to SMEs.
Since 2022, the Ministry of Finance, Economic Stabilization and National Policies continuously engaged in discussions with ADB to ensure further assistance to the SME Sector which faced severe difficulties due to the effects of unprecedented COVID 19 pandemic and consequent economic crisis situation and hence, had negotiations with ADB in 2023 to mobilize USD 100 million and Technical Assistance (TA) on grant basis to finance the “Enhancing Small and Medium-sized Enterprises (SME) Finance Project” in order to further enhance SME’s access to finance.
This project is an important component of the government’s comprehensive economic reform strategy. The reform measures implemented over the last 2 years have been successful in stabilizing the economy, and in parallel, measures have been put in place to shift economic trajectory from stabilization to growth. Considering the fact that revitalisation of the SME sector is a crucial component of economic recovery, the government commenced technical discussions with ADB over a year ago in order to design this project to address key financial constraints faced by SMEs.
As the backbone of Sri Lanka's economy, SMEs represent over 75 percent of all businesses, and contribute more than 50 percent to the country's Gross Domestic Production (GDP). SMEs are estimated to generate employment for over 45% of the workforce, thereby creating significant spill-over impacts on the economy as a whole. Following significant challenges stemming from a series of shocks, including the COVID-19 pandemic and the prevailing economic downturn, the SME sector has faced substantial disruptions to their normal business operations largely due to factors beyond their control. Accordingly, the Government of Sri Lanka considered it a priority to address these challenges through early interventions, of which this project is a key component. USD 50 million of the ADB financing will be allocated towards a SME line of credit loan scheme which will facilitate easier access to finance for SMEs. This will be a crucial financial injection which will support the stabilization of SMEs and set the foundation for sustainable growth and SME’s contribution to the recovery of the Sri Lankan economy.
One of the key challenges faced by SMEs in the past has been the inability to adequately utilize credit lines or concessional loan schemes due to perceived credit risk and associated requirements for collateral and guarantees. To remedy this constraint, the Government has taken a strategic step by incorporating the National Credit Guarantee Institution (NCGI) as a public limited company, to address the issue of collateral and guarantees. This initiative aims to provide partial credit guarantees for SMEs, offering them a sustainable solution to their financing challenges. USD 50 million of the ADB financing will be allocated as the Government's initial capital infusion into the NCGI.
The Ministry of Finance, Economic Stabilization and National Policies (MOF) will be the executing agency of the above program and will implement the project in collaboration with the Department of Development Finance and NCGI.
The loan agreement to borrow the above loan of USD 100 million was signed between the Government of Sri Lanka and the Asian Development Bank today at the General Treasury in Colombo. Mr. K. M. Mahinda Siriwardana, Secretary to the Treasury, and the Ministry of Finance, Economic Stabilization and National Policies, placed his signature on behalf of the Government of Sri Lanka, and Mr. Utsav Kumar, Principal Country Economist, ADB Sri Lanka Residence Mission, signed on behalf of the Asian Development Bank.
Department of External Resources
Ministry of Finance, Economic Stabilization and National Policies
25 March 2024
Japan-Sri Lanka Economic Cooperation Policy Dialogue - 2024
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The Japan-Sri Lanka Economic Cooperation Policy Dialogue - 2024 was held on January 05, 2024, at the Ministry of Finance in Colombo. The forum was in order to exchange views on matters pertaining to the Japanese-funded project portfolio, explore future developments, and prospective economic cooperation between Japan and Sri Lanka going forward. The Japanese delegation was led by Mr. Endo Kazuya, Director-General, International Cooperation Bureau, Ministry of Foreign Affairs of Japan. Mr. K. M. Mahinda Siriwardana, Secretary, Ministry of Finance, Economic Stabilization and National Policies and Mr. Endo Kazuya, Director - General, Co-Chaired the meeting along with both relevant government officials.
At the discussion, Secretary, Ministry of Finance, Economic Stabilization and National Policies expressed his warm gratitude and appreciation for the continuous support extended by the Government of Japan towards Sri Lanka throughout history. He made special reference to Japan's recent assistance across a broad spectrum of initiatives, including the debt restructuring process, and the IMF supported macroeconomic reform programme, which have been crucial components of Sri Lanka's ongoing recovery from its worst economic crisis in post• independence history.
The Secretary also explained the implementation status of various macroeconomic reforms and the debt restructuring process. He emphasized Sri Lanka’s firm commitment to ensure comparability of treatment between all holders of external debt from the outset of this process. The Secretary reiterated Sri Lanka's commitment to implementation of governance related reforms, underpinned by a number of ongoing legislative and institutional measures.
In Response, DG Endo expressed his appreciation for Sri Lanka's efforts to recover from the economic crisis and shared his expectations of a speedy recovery. Furthermore, he outlined his appreciation of the government's commitment on continuing the economic reforms supported by the IMF programme. DG Endo reiterated the importance of the early completion of signing of a Memorandum of Understanding (MoU) on debt restructuring between the Official Creditor Committee (OCC) and the Sri Lankan government, as well as the need to ensure transparency and comparability in agreements with creditors outside the OCC.
The two sides also exchanged views on Japan's future economic cooperation with Sri Lanka, including the existing Yen loan projects, to stabilize and reinforce Sri Lanka's economy as well as overcome its socio-economic challenges. DG Endo stated that Japan will continue to provide support to the people of Sri Lanka to help the country fully recover from the economic crisis as soon as possible and return to a path of progressive development.Mr. Siriwardana requested future cooperation from the Goverrnnent of Japan including the existing Yen loan projects as a catalyst to attract further investment, along with technical and financial support for the ongoing reforms associated with the IMF programe. He further outlined the investment climate that Sri Lanka intends to build and invited Japanese investors to actively evaluate potential investments in Sri Lanka.
Ministry of Finance, Economic Stabilization and National Policies
Colombo 01
On January 05, 2024
Provision of Japanese Yen One Thousand and Six Hundred Million (approximately LKR 3.3 billion) Grant Assistances from Government of Japan under Japanese Economic and Social Development Programme
Provision of Japanese Yen One Thousand and Six Hundred Million The Government of Japan, as one of our main development partners, provides concessional loans and various grant aid schemes such as Economic and Social Development Programs, Technical Cooperation, Research Partnerships, Development Studies, and non-project grant aid with a view to improving the socio-economic status by strengthening bilateral relations between the two countries.
During the present economic crisis in Sri Lanka, the government of Japan has extended its cooperation by providing required immediate humanitarian assistance for the affected community as well as by equipping the public sector, aiming to improve the socioeconomic situation in the country.
At this juncture, at the request of the Government of Sri Lanka, the Government of Japan has agreed to provide grant assistance amounting to Japanese Yen one thousand and six hundred million (approximately LKR 3.3 billion) under the Japanese Economic and Social Development Programme, considering the requirements of diversified fields namely marine environment, fishing, health care, and vocational training.
Under this grant assistance four vessels for oil boom with the necessary accessories, a generator, and a cargo truck with a crane for improving oil spill response and management of the Sri Lanka Coast Guard; portable ultrasonic scanners, gynecological examination tables, a laparoscopic system, mammography, fetal heart rates, and infant warmers for improving the maternal and pediatric care in major hospitals in Northern Province; industrial sewing machines, zigzag (industrial) machines, overlock (5 thread) machines, and button holder (5 thread, industrial) machines for dressmaker courses at vocational training centers in Northern Province; and a petrol boat, a rigid-hull inflatable boat, lighted buoys, and HG radio Transceivers will be provided for the project of ensure the safety of fishermen will be provided.
The Exchange of Notes pertaining to the above grant was signed by the Secretary to the Ministry of Finance, Economic Stabilization, and National Policies, Mr. K.M. Mahinda Siriwardana, on behalf of the Government of Sri Lanka on March 18, 2024, at the Ministry of Finance, Economic Stabilization, and National Policies. His Excellency the Ambassador of Japan in Sri Lanka, Mr. MIZUKOSHI Hideaki signed the Exchange of Notes on behalf of the Government of Japan.
Ministry of Finance, Economic Stabilization and National Policies
Colombo 01
On March 18, 2024.
USD 500 Million Financial Assistance from the International Development Association of the World Bank for the Implementation of Sri Lanka Resilience, Stability and Economic Turnaround (RESET), Development Policy Operation (DPO) Program
The Government of Sri Lanka is planning to borrow USD 500 million from the International Development Association (IDA) of the World Bank Group in 2023 to finance the implementation of Sri Lanka First Programmatic Resilience, Stability and Economic Turnaround (RESET), Development Policy Operation (DPO) Program.
The DPO is a two-year program from 2023-2024. USD 500 million will be provided under this program in two equal tranches to support the Government of Sri Lanka’s foundational reform plan. This plan aims to restore stability through macroeconomic adjustments in the short run, help the poor and vulnerable cope with the current shock, and address structural causes of the current economic crisis to help restart growth. The DPO’s first tranche of USD 250 million will be available for disbursement upon the effectiveness of the operation after World Bank Board approval on 28th June 2023. The second tranche will be available in October 2023 subject to the enactment of the Banking (Special Provisions) Act, acceptable progress in carrying out the program, and continued adequacy of the macroeconomic policy framework.
The DPO program seeks to address some of the root causes of the economic crisis and introduce measures to avoid a repetition of such a crisis through three pillars: (i) improving economic governance to strengthen fiscal discipline, transparency, and accountability of fiscal and public resource management and safeguard financial stability; (ii) enhancing growth and competitiveness to unlock Sri Lanka’s growth potential through a more vibrant and competitive private sector; and (iii) protecting the poor and vulnerable from the fallout of the crisis.
The relevant Loan Agreement for the Sri Lanka Resilience, Stability and Economic Turnaround (RESET), Development Policy Operation (DPO), amounting to USD 500 million was signed by Mr. A.K. Seneviratne, Deputy Secretary to the Treasury, and Mr. Faris H.Hadad-Zervos, Country Director, on 29th June 2023 on behalf of the Government of Sri Lanka and IDA, respectively.