World Bank Injects $250 Million to Catalyze Economic Reforms in Sri Lanka

COLOMBO: In a move to bolster the ongoing economic reforms in debt-ridden Sri Lanka, the World Bank announced on Wednesday the disbursement of $250 million, constituting the second and final tranche of a $500 million package. This financial support is aimed at aiding the country's recovery from last year's financial crisis, during which Sri Lanka defaulted on its $46 billion external debt in April 2022.

Following the debt default and the subsequent civil unrest leading to the removal of then-President Gotabaya Rajapaksa, the current administration has implemented stringent austerity measures to address the economic challenges. The released funds from the World Bank come in response to the "continued satisfactory progress made by the government with the reform program."

To counterbalance the financial turmoil, Sri Lanka has undertaken measures such as doubling taxes, eliminating subsidies on fuel and electricity, and enacting anti-graft legislation, aligning with the conditions set by the International Monetary Fund (IMF) for a $2.9 billion bailout.

In addition to the World Bank's financial infusion, the IMF recently disbursed the second tranche of $337 million from its four-year bailout package, following Sri Lanka's successful negotiation of a debt restructuring agreement with its major bilateral lender, China.

Despite the positive development of the economy expanding by a modest 1.6 percent in the September quarter—the first growth since the foreign exchange crisis—overall figures for the first nine months of the year indicate a contraction of 4.9 percent.

The Central Bank of Sri Lanka released this data, highlighting both the progress and challenges faced by the nation's economy. The IMF's forecast for Sri Lanka's full-year GDP growth in 2023 remains pessimistic, projecting a negative 3.6 percent.