In response to the economic and sovereign debt crises faced by Sri Lanka since April 2022, the Asian Development Bank (ADB) has approved a concessional loan of $200 million to help stabilize the country’s finance sector.
The loan is part of the Financial Sector Stability and Reforms Program, which consists of two subprograms, each with a funding of $200 million.
The first subprogram, implemented in 2023, focuses on short-term stabilization and crisis management measures. The second subprogram, scheduled for 2024, aims to implement structural reforms and long-term actions to restore growth in the banking sector.
The program’s objectives include strengthening the stability and governance of Sri Lanka’s banking sector, improving the asset quality of banks, and promoting sustainable and inclusive finance, particularly for women-led micro, small, and medium-sized enterprises.
According to the latest review by the International Monetary Fund (IMF), Sri Lanka’s economy is showing initial signs of stabilization, although a full recovery is not guaranteed.
Takafumi Kadono, ADB Country Director for Sri Lanka, emphasized that the program aligns with the country’s strategy of maintaining finance sector stability and ensuring banks are well-positioned for recovery. The anticipated outcome is a stable financial system that provides affordable finance to various sectors of the economy.
This loan is a continuation of ADB’s crisis response, following the approval of a special policy-based loan for Sri Lanka in May 2023. It also aligns with the IMF’s Extended Fund Facility, which supports Sri Lanka’s efforts to regain financial stability.
The program is consistent with the government’s reform agenda, which includes strengthening the operational independence of the Central Bank of Sri Lanka (CBSL) and designating it as the country’s macroprudential authority.
Close collaboration with the IMF and the World Bank has been maintained in designing targeted regulatory reforms for the banking sector and strengthening the deposit insurance scheme.
In addition to the loan, ADB will provide $1 million in grant funding from its Technical Assistance Special Fund to offer advisory support, knowledge sharing, and capacity building to Sri Lanka’s Ministry of Finance and CBSL.
ADB remains committed to promoting prosperity, inclusivity, resilience, and sustainability in Asia and the Pacific, while also continuing efforts to eliminate extreme poverty.
