• Wednesday, May 29, 2024


World Bank’s welfare funds come to Sri Lanka’s rescue

The economy is expected to shrink two per cent this year before returning to growth next year, the government estimates

Sri Lanka’s economy is estimated by the World Bank to have contracted by 3.8 per cent last year (Photo by ISHARA S. KODIKARA/AFP via Getty Images)

By: Eastern Eye

THE World Bank is likely to approve $700 million (£548m) in budgetary and welfare support for Sri Lanka at its next board meeting next Wednesday (28), sources told Reuters, the biggest funding tranche for the crisishit island nation since an IMF deal in March.

The economy is expected to shrink two per cent this year before returning to growth next year, the government estimates. It follows last year’s record contraction of 7.8 per cent after foreign exchange reserves hit hitherto unseen lows.

The International Monetary Fund (IMF) approved a bailout of nearly $3 billion (£2.35bn) in March, which Sri Lanka expects will bring additional funding of up to $4bn (£3.13bn) from the World Bank, the Asian Development Bank and other multilateral agencies.

Of the proposed World Bank funding, $500m (£390m) will be for budgetary support and is likely to come in two tranches of $250m (196m) each, one of the World Bank sources said.

All four sources, from the World Bank and the Sri Lankan finance ministry, sought anonymity as they were not authorised to talk to the media.

The first tranche is likely to be disbursed immediately after board approval, with the next possibly in October, as the bank watches the progress of Sri Lanka’s debt restructuring and the first review of the IMF programme, due in September, the World Bank source added.

The remaining $200m (£157m) will be earmarked for programmes to assist the poor, whose numbers have doubled to 25 per cent of the population since the onset of the Indian Ocean nation’s worst economic crisis early last year, another World Bank source said.

“Households that have registered for support will be ranked … and the lowest two million will be eligible for support,” the source added.

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