ECONOMYNEXT – Sri Lanka has requested Asian Development Bank to re-classify the Indian Ocean Island to enable to country to get cheaper funds, Foreign Minister Ali Sabry has said.
The request was made from ADB Vice President Shixin Chen at a meeting of ADB governors in South Korea.
“I requested, inter-alia, for a reclassification of #SriLanka which would enable the country to get access to better concessional financial facilities,” Minister Sabry said in a twiiter.com message.
Sri Lanka is middle income country which got lower amounts of the cheapest Asian Development Fund (ADF) resources and was given mostly Ordinary Capital Resource (OCR) loans, until its sovereign default in 2022 after severe monetary instability.
ADF only countries get access to the most concessional funds.
Sri Lanka has borrowed ADF funds at around 1.5 percent fixed a year with up to 32 year payback.
Sr Lanka has borrowed OCR funds at around 50 to 70 basis points above the London Interbank Offered Rate (now SOFR) floating rates.
The most vulnerable countries also get more grants.
Sri Lanka defaulted in April 2022 after seven years of flexible inflation targeting combined with output gap targeting (printing money to suppress interest rates to boost growth and generate inflation as high as 5 percent, despite having a reserve collecting peg).
The ADB is supporting Sri Lanka with policy loans under an International Monetary Fund program to stabilize the country after the collapse of its currency and default. (Colombo/May05/2023)