The World Bank has approved Sri Lanka’s Eligibility to access concessional financing from the International Development Association (IDA).
This type of financing, which is offered at low interest rates, will enable the country to implement its government-led reform program to stabilize the economy and protect the livelihood of millions of people facing poverty and hunger, said the World Bank on Tuesday (6).
The request is the result of Sri Lanka’s sustained deterioration in economic and social conditions, which have reduced income levels, reversed poverty gains, and affected its access to financial markets. This approval means Sri Lanka now becomes an IDA country.
“We are committed to helping the Sri Lankan people at this time of dire need so their country turns around and restores its economic well-being,” said Akihiko Nishio, World Bank Vice President for Development Finance.
“The World Bank is ready to support Sri Lanka as it implements reforms that will reduce poverty and rebuild the economy, creating the foundation for sustainable growth.”
Through IDA support, the World Bank will provide concessional financing, technical assistance, and policy advice as Sri Lanka implements reforms to drive recovery and enhance the country’s economic prospects, especially measures directed towards the poor.
With this approval Sri Lanka secured a US$ 300 million annual commitment from the World Bank’s International Development Association (IDA) following a meeting of its deputies in Washington recently.
As a member of the World Bank, the IDA is the financial institution that offers concessional loans to developing countries.
At Thursday’s meeting, the IDA reviewed Sri Lanka’s request for a temporary downgrade to lower-income-country (LIC) status from a middle-income-country (MIC) status.
The request was for a reverse classification to allow IDA concessional financing as, after the default in April, Sri Lanka was not credit-worthy for loans from the World Bank’s IBRD (International Bank for Reconstruction and Development). Sri Lanka was eligible for US$ 500 million annually from the IBRD until the default.
Access to IDA’s concessional financing would also alleviate existing debt service pressures given the more favorable terms IDA financing carries. As an IDA country, Sri Lanka will also be subject to IDA operational policies.
The reverse graduation to IDA will enable Sri Lanka to access resources to help sustain institutions to become more resilient and responsive to the needs of the people of Sri Lanka
Access to IDA’s concessional financing would also alleviate existing debt service pressures given the more favourable terms IDA financing carries. As an IDA country, Sri Lanka will also be subject to IDA operational policies, according to the World Bank.
Since 2017, when it first graduated from IDA, Sri Lanka has been creditworthy for lending from the World Bank’s International Bank for Reconstruction and Development (IBRD).
