By: Staff Writer
September 25, Colombo (LNW): Sri Lanka’s fragile economy has increasingly become dependent on foreign assistance, with grants and preferential trade schemes forming critical lifelines. The latest example came yesterday, when the Finance Ministry announced a €8 million ($9.4 million) grant from the European Union (EU) aimed at supporting biodiversity conservation and solid waste management.
Treasury Secretary Dr. Harshana Suriyapperuma, who signed the agreement with EU Ambassador Carmen Moreno, hailed the project as consistent with Sri Lanka’s sustainable development agenda. The project will focus on restoring degraded ecosystems, implementing conservation strategies, and modernising waste management areas long plagued by underfunding and policy neglect.
Ambassador Moreno noted that biodiversity is among Sri Lanka’s most valuable assets, adding that EU expertise, technology, and private-sector investment would back these initiatives. “Protection of biodiversity contributes to global health and the fight against climate change,” she said.
But experts caution that such grants, while welcome, are modest compared to Sri Lanka’s larger financial challenges. For instance, the United States provided over $42 million in grants to Sri Lanka in 2024, with allocations spanning renewable energy, agriculture, democratic governance, and humanitarian relief. These flows of aid, however, often come linked to broader policy agendas, raising questions about how much sovereignty Sri Lanka retains in shaping its development path.
Beyond grants, the EU wields another tool with far greater economic impact—the Generalised Scheme of Preferences Plus (GSP+), a preferential trade arrangement that allows duty-free access to more than 6,000 Sri Lankan products in European markets.
According to the Central Bank, Sri Lanka exported $3.6 billion worth of goods to the EU in 2024, making the bloc its second-largest export destination. Of this, the apparel sector accounted for over $2.5 billion, representing nearly 40% of total national export earnings.
The stakes are therefore high: if Sri Lanka loses GSP+ due to non-compliance with EU requirements—covering 27 international conventions on human rights, labour rights, environmental protection, and good governance exports could take a severe hit. Industry analysts warn that without duty-free access, Sri Lankan apparel could lose competitiveness against rivals like Bangladesh and Vietnam, potentially leading to tens of thousands of job losses, particularly among women in garment factories.
This review is particularly sensitive given the EU’s ongoing monitoring of governance and human rights concerns in Sri Lanka. A potential suspension of GSP+ would dwarf the benefits of the $9.4 million biodiversity grant, wiping out billions in export revenues.
The contrasting scale between modest grants and massive trade leverage underlines a deeper truth: aid and concessions rarely come without conditions. While the EU’s grant addresses vital environmental concerns, Sri Lanka’s long-term economic stability depends on its ability to safeguard GSP+ status while balancing domestic policy priorities with external expectations.
As the country struggles to rebuild from its debt and currency crises, its reliance on such international partnerships exposes both opportunity and vulnerability. The EU grant may help green the economy, but the looming GSP+ review could decide the fate of hundreds of thousands of livelihoods.
