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The Asian Development Bank (ADB) is planning to lend US$570mn to Sri Lanka over the next two years, according to a Country Strategy and Program (CSP) Update for 2005-06 endorsed by the ADB’s board of directors.

The loan amount is based on annual commitments of US$90mn from ADB’s concessional Asian Development Fund (ADF), which assists the bank’s poorest members, and a total of US$390mn over two years from its ordinary capital resources (OCR).

Final allocations, however, will depend on country performance and resource availability.

“Assuming continued economic growth and economic reforms, the programme plans a gradual move toward increased OCR lending for power and major road projects, and retains ADF for education, remote provincial and rural roads, and urgent reconstruction and rehabilitation work in the north and east,” says Alessandro Pio, country director at ADB’s resident mission in Sri Lanka.

ADB’s CSP, endorsed by the board in 2003, focuses on economic reform and governance, rehabilitation in conflict-afflicted areas, and direct poverty reduction and rural infrastructure.

The current CSP is closely linked to the Tokyo Conference for Sri Lanka, held in June last year, in which ADB played a major role. As one of Sri Lanka’s most important development partners, ADB pledged support at the conference for the country’s reconstruction and development of up to US$1bn over the four-year period from 2003 to 2006.

Among the projects planned for the 2005-06 period are:

– Three transport projects: the Colombo-Katunayake expressway, National Highway Sector Development, and Colombo Port South Harbor projects.
– The second phase of the North East Community Restoration and Development Project and a Basic Social Infrastructure Development project.
– Loans for the commercialisation of agriculture and expansion of rural electrification.
– The second phase of the Small and Medium Enterprise (SME) Development project.
– A technical education project, a wastewater management project for Colombo, and a Jaffna water supply project.

“ADB will also assist the government in its renewed and stronger focus on SMEs and in promoting growth in the more remote and poor regions,” says Pio.

“To tackle the growing regional inequality in the country, ADB will not only address poverty in general, but also improve the manner in which its assistance is distributed throughout the country.”

The lending programme will be complemented by technical assistance (TA) grants, amounting to US$4.9mn over the next two years. These will focus on the preparation of loan projects.

Sri Lanka’s social indicators show it is the most advanced in Asia in terms of infant and maternal mortality rates, education ratios, and most gender indexes.

Its future economic performance depends crucially on progress in the peace talks, the government’s increasing budget deficit, and on global economic growth and oil prices. ADB will monitor progress in economic reforms and will adjust its programme accordingly.

CSPs define ADB’s medium-term development strategy as agreed with the country. A CSP update is prepared every year taking into account the continued relevance of the CSP, its implementation, and ADB’s operational programme.