Sri Lanka’s Finance Ministry has inked agreements to borrow 300 million US dollars from the Asian Development Bank, were approved by its board in recent weeks of which 270 million dollars are policy-based or ‘budget support’ credits.
A 100 million dollars came from a policy-based loans on Financial Sector Stability and Reforms Program (Subprogram 3) from the ADB’s Concessional Ordinary Capital Resources window after 11 policy actions on strengthening governance in the banking sector, the Finance Ministry said.
Another 100 million dollars came from Strengthening Macroeconomic Resilience and Transparency Program (Subprogram 1), from Concessional Ordinary Capital Resources after completing 11 policy actions aimed a public financial management.
Another 100 million dollars comes from the Sustainable Tourism Sector Development Program (Subprogram 1) of which 30 million dollars have an investment component to spend.
The 30 million dollars from the ADB’s Ordinary Capital Resources will be used to “develop and expand the tourism potential and carrying capacity of the Trincomalee and Dambulla (including Sigiriya area) destinations.”
The Ministry of Transport, Highways and Urban Development serves as the Executing Agency, and Implementing Agency for the investment activities.
Policy based loans or budget support loans, which have no investment component do not have domestic spening and can be used for any purpose, including debt repayment, or kept in a fiscal reserve to service future debt as long as the dollars are not sold to the central bank to create new money.
If rupees can be raised from taxes or borrowings to give the Ministry of Highways and Urban Development the 30 million dollars could also be used for debt repayment. However construction activities would separately trigger imports such as road tar, steel, cement or fuel.
The agreements were signed by Harshana Suriyapperuma, Secretary, Ministry of Finance, Planning and Economic Development, and Takafumi Kadono, Country Director, ADB Sri Lanka Residence Mission.
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