By: Staff Writer
April 01, Colombo (LNW): The Sri Lankan government is actively seeking alternative financing for at least a dozen government projects previously supported by USAID. This move follows the recent decision by the U.S. government to freeze foreign assistance, significantly affecting Sri Lanka’s development programs, a senior ministry official stated.
At the time of the funding freeze, USAID was supporting five key projects, including initiatives under the Ministries of Justice, Finance, and Environment. USAID funding accounted for approximately 1.34% of the government’s budget for over ten major programs spanning agriculture, climate change adaptation, disaster preparedness, youth entrepreneurship, and border security, according to Finance Ministry data.
Since 2019, USAID has contributed $233.4 million to Sri Lankan government programs. This included disbursements of $20.4 million in 2019, $41.9 million in 2021, $26 million during the 2022 economic crisis, and $18.1 million plus $24.5 million in 2024 for market-driven growth and governance improvements.
Several major projects have been affected, including the $22.9 million PARTNER project, aimed at enhancing trade regulations, which was halted. The $15 million “Efficient and Effective Justice” program has been suspended. The $19 million Sri Lanka Energy Project, which supported renewable energy initiatives, has also been impacted. Additionally, USAID granted $46 million in 2023 to address the fertilizer crisis, and the sudden funding freeze has left a significant gap.
The Finance Ministry confirmed that Sri Lanka must now seek alternative funding sources to sustain these projects. Efforts are underway to secure financial support from other foreign donors and financial institutions, including countries and organizations with a history of assisting Sri Lanka’s development efforts. The Treasury is also exploring the reallocation of local financial resources to prioritize and sustain key projects affected by the freeze.
In response, the government is emphasizing public-private partnerships to attract private sector investment into public projects, aiming to mitigate the impact of declining foreign aid while maintaining momentum in crucial development sectors. Negotiations with multilateral institutions such as the World Bank and the Asian Development Bank are ongoing to secure loans or grants for sustaining priority projects.
Despite these measures, the abrupt termination of USAID assistance poses challenges such as project delays and the urgent need for alternative financing. The government is working to redirect funds without disrupting essential services, and officials have reiterated their commitment to ensuring project continuity despite the funding freeze.
The Finance Ministry continues discussions with foreign donors and financial institutions to bridge the gap left by the USAID suspension, with a strong focus on leveraging public-private partnerships to sustain development initiatives. While the government navigates these financial hurdles, the urgency of securing new funding remains critical to preventing disruptions in key sectors.
