ECONOMYNEXT – Sri Lanka can tap up to a billion US dollars a year from the Asian Development Bank doubling its current drawdown and also request budgetary support with a strong reform program, Vice President Wencai Zhang said.
"We are happy to support the new governments priorities and reforms to help make Sri Lanka a more competitive economy with a high inclusive and sustainable growth," Zhang told reporters in Colombo.
In 2014, ADB has funded 457 million US dollars of projects and is expected to fund 470 million dollars in 2015 and
Zhang said ADB was prepared to ramp up lending to Sri Lanka if the government had good bankable projects.
The project in the pipeline over the next three years already totalled more than two billion US dollars, with a billion dollars to be spent on education over three years.
"But starting from 2017 we may try to increase annual lending get a lots of project on the pipeline," Zhang said.
He said subject to Sri Lanka’s willingness to borrow from the ADB, the bankability of the projects and capacity to implement them, the ADB was prepared to fund then.
Budgetary support was also available even for next year if a reform program was on the table.
"We know that the government may request a policy support loan," Zhang said.
"However if we do a policy support loan we should be clear what reform we should we support."
Zhang said initial discussions were around a capital markets development. The volume of lending could range from 100 to 300 million US dollars or more depending on the strength of the reforms and other partners, he said.
Zhang had met Prime Minister Ranil Wickremesinghe, Finance Minister Ravi Karunanayake and senior officials during his visit to Colombo.
The new administration is keen on liberalize land markets, where freehold is not widespread in Sri Lanka due to excessive state ownership of land which reduced the development of freehold and expropriation of freehold that had developed by post-independent rulers.
Unlike capital market borrowings which may lead countries to debt distress later, ADB and World Bank lending for budgetary support have reform elements including enhanced economic freedoms for the people, that can eventually generate tax revenue and expand economic output.
Such lending or a strong reform program has been absent in Sri Lanka over the past decade, leading to a bloated state and high foreign commercial debt.
Among project loans in the pipeline were roads, healthcare, water supply and sanitation, irrigation and energy. ADB was also planning to fund railways. (Colombo/Sept29/2015)