It extended a $100 million credit from the International Development Association (IDA) to support the Government’s economic reform program.
Sri Lanka has been making steady progress on economic reforms, with the Government aiming to create one million new jobs through a reform package focused on improving the country’s competitiveness, transparency and macroeconomic stability.
A recent World Bank study, the Systematic Country Diagnostic, highlighted the need for Sri Lanka to move from a largely inward-looking and public sector-driven economy to one that is capable of unleashing the potential of the private sector – leading to post-conflict economic growth and creating more and better jobs for Sri Lankans. The Sri Lanka Competitiveness, Transparency and Fiscal Sustainability Development Policy Financing (DPF), which is only the second DPF to Sri Lanka in a decade, aims to support the Government’s reform agenda by reducing obstacles to private sector competitiveness, establishing transparent and well managed public institutions and improving fiscal sustainability.
“It is the aspiration of all Sri Lankans to move up the income ladder. To make this a reality the government is faced with the challenge of balancing the implementation of critical reforms aimed at sustaining growth while creating jobs,” said Idah Pswarayi-Riddihough, World Bank Country Director for Sri Lanka and the Maldives.
“Improving fiscal sustainability while creating the fiscal space for improved service delivery, social spending and capital investment are all priorities to make Sri Lanka more competitive. Ensuring success from reforms is not a one-time activity and the Government will continue to use a number of instruments to make sure that outcomes achieved are sustained,” Pswarayi-Riddihough further emphasised.
“Improving a country’s competitiveness and creating more and better jobs require a number of factors to be in place, from stable macroeconomic environment and good governance to predictable policies, adequate access to finance, and an efficient regulatory environment that minimises the cost of doing business,” said Emanuel Salinas Munoz, Program Leader for Growth and Competitiveness of the World Bank. “This program will support the Sri Lankan Government’s commitment to unleash the potential of Sri Lankan enterprises to grow, become more competitive and better integrate with the global economy.”
The Ministry of National Policies and Economic Affairs will be responsible for the overall implementation and coordination of the proposed operation. Other agencies involved include the Ministry of Development Strategies and International Trade, the Ministry of Finance, the Ministry of Parliamentary Reforms and Mass Media, the Auditor General’s Department, the Board of Investment and the Central Bank of Sri Lanka.
DPF operations provide untied financial support directly to the Treasury to distribute through their regular budgeting mechanisms upon completion of a package of policy and institutional reforms. The World Bank Group provides technical assistance to the Government in support of its reform efforts under this program at no cost to the Government.
Sri Lanka, World Bank Sign agreement to protect country’s ecosystems
The Government and the World Bank also signed a $45 million credit to help protect Sri Lanka’s natural habitats and resources from degradation and over-exploitation. The project will assist the Government improve the lives and livelihoods of neighboring communities, who suffer the most from natural resources loss and degradation.
The Ecosystem Conservation and Management Project (ESCAMP) will benefit approximately 15,000 residents; 30% among them women, with most of them belonging to marginalised groups. It will protect and foster the sustainable use of natural resources by introducing more competitive and compatible livelihood opportunities.
Through the Department of Wildlife Conservation and Forest Department, the project will support the management of protected areas. Improved landscape management, better awareness and improved coordination on natural resource management among different stakeholders, and increased quality of nature-based tourism are some of the expected results.
“Sri Lanka is blessed with a rich endowment of eco-systems. Striking a fair balance between economy and ecology is crucial, not only for the preservation of the ecosystem but also for helping people emerge from poverty,” said Idah Pswarayi-Riddihough, World Bank Country Director for Sri Lanka and the Maldives.
“Managing this natural heritage is the responsibility of all Sri Lankans. Benefits of well-managed eco-systems includeimproved national economy as well as addressing challenges such as human wild life conflicts and climate change effects.”
A recent World Bank Group assessment, the Systematic Country Diagnostic (SCD) underlined the importance of environmental management and stewardship to preserve Sri Lanka’s natural resources while developing tourism.
“The project will improve responsible planning and management of protected areas and other biologically and ecologically important locations throughout Sri Lanka,” said Darshani De Silva, Senior Environment Specialist and Project Task Team Leader.
“It will help to create sustained linkages with communities living adjacent to protected areas to ensure participation in protection of critical ecosystems and benefit sharing, promote compatible developments within and around sensitive ecosystems, raise quality of visitor services and revenue potential of forest and wildlife resources, while developing the capacity of Forest Department and Department of Wildlife Conservation to deliver on their institutional mandates.”
This project also aligns with the Government’s policies to expand forest cover in line with Sri Lanka’s environmental action plan, Punarudaya. It will develop human-elephant co-existence mechanisms and protect watersheds to boost agricultural productivity.
Over time, the project will reinforce the emerging strategy on Reducing Emissions from Deforestation and Forest Degradation (REDD+) as well as policies to promote sustainable water, agriculture and energy practices, while supporting social inclusion and resilience to climate and disaster risks.
The credit for this project is provided by the International Development Association (IDA) – the World Bank’s concessionary lending arm –with a maturity of 25 years, including a five-year grace period. The Ministry of Mahaweli Development and Environment will lead implementation in close partnership with Ministry of Sustainable Development and Wildlife.
World Bank supports Sri Lanka to advance disaster recovery efforts
Additionally Sri Lanka and the World Bank yesterday signed a $42 million credit to protect people and infrastructure from climate-related risks and support the Government in responding effectively to disasters.
This financing comes as additional financing for the ongoing Climate Resilience Improvement Project (CRIP) approved in April 2014, to scale up the repair and disaster proofing of irrigation and flood control infrastructure and road infrastructure which are damaged by recent extreme weather events
The CRIP was approved together with a Catastrophe Deferred Draw-Down Option facility (CAT-DDO); as a joint package designed to finance short term and long term interventions to reduce climate and disaster risk.
The CAT-DDO is a contingent credit line that provides immediate liquidity to middle income countries after a natural disaster, a time when liquidity constraints are usually highest. This type of financing is typically used to finance losses caused by recurrent natural disasters and is most effective as part of a broader risk management strategy in countries highly exposed to natural disasters.
In addition to the $ 42 million additional financing, the government also was able to access $ 101.47 million through this facility after the floods and landslides disaster of May 2016.
“Recent floods and landslides have demonstrated the challenges posed by extreme weather conditions to economic growth prospects and poverty reduction of Sri Lanka. Managing the risks to people’s lives, investments and assets, in general, through risk financing is therefore a priority for the Government,” said Idah Pswarayi-Riddihough, World Bank Country Director for Sri Lanka and the Maldives.
In May 2016, Sri Lanka was severely affected by the tropical storm Roanuthat killed 96 people as well as causing widespread flooding and landslides in 22 districts. The preliminary findings of the Post Disaster Needs Assessment (PDNA) conducted by the Government, with the support of the United Nations and World Bank, show total damages and losses in excess of $570 million.
Considering the severity of the disaster and its impacts on human life, the President declared a State of Disaster in Western, North Western, Sabaragamuwa, North Central, Central and Uva Provinces, as per the Disaster Management Act No. 13 of 2005.
“Such a proclamation of a State of Disaster by the President rendered the Government eligible to draw-down of the CAT-DDO proceeds. The $101.47 million that the Government received last week under this facility will enable the Government to expedite the ongoing post disaster recovery efforts due to floods and landslides of May,” said Marc Forni, Task Team Leader of the project.
The World Bank Group’s activities are guided by a Country Partnership Framework (CPF) which is agreed upon with the Government of Sri Lanka; the CPF will shape the collaboration for the next four years until June 2020.The World Bank’s current portfolio consists of $1.9 billion in financing commitments.