By: Staff Writer
April 03, Colombo (LNW): Sri Lanka made significant strides in mobilising foreign financing, closely tied to its debt restructuring agreements with international bondholders, lending agencies, and donor countries between 2024 and March 2025. But it is less than the amount mobilised by the treasury in 2023, finance ministry data shows.
Debt restructuring arrangements of Sri Lanka in December 2024 facilitated foreign financing and assisted in economic recovery. However, the continuity of foreign borrowing during this period necessitates careful fiscal management for maintaining long-term debt sustainability and economic stability.
This achievement has provide a five-year grace period from bilateral creditors and extended repayment periods, creating approximately US $5 billion in fiscal space.
While this process resulted in immediate fiscal relief and improved liquidity, continued foreign borrowing during this period had significant effects.
It has helped the government to set apart resources to critical areas such as infrastructure, healthcare, and economic growth initiatives.
These foreign funds contributed to a 5 percent economic growth in 2024 resulting recovery from the 2022 financial crisis, a high official of the ministry disclosed.
From January to October 2024, the Government entered into sixteen agreements with foreign development partners and lending agencies to mobilize foreign financing amounting to $ 955.5 million, of which USD 904.7 million was committed in the form of loans.
Given the prevailing economic situation of the country, 43 percent of the total commitments, i.e $ 408 million has been mobilized for budgetary support purposes, the latest budget, economic and fiscal Position report of the finance ministry revealed.
Out of the total loans, US$ 511.5 million and $ 393 million had been borrowed from the World Bank and the Asian Development Bank (ADB), respectively
Apart from loan agreements, $ 50.8 million was committed through eight grant agreements with the Government of Japan, Government of Australia and the European Union under Official Development Assistance (ODA) in the first ten months of 2024.
Foreign Financing Disbursements and Utilization
Total foreign fund disbursements from January 1 to October 31, 2024 amounted to $1,482.3 million of which $1,458.4 million were disbursed as loans and $23.9 million were disbursed as grants.
ADB accounted for the majority share of disbursements amounting to 37 percent of all the disbursements, followed by loan agreements with WB (33 percent) and IMF (23 percent), respectively.
The majority of disbursements had been to the budget support sector which accounted for 50 percent of the disbursements, water supply and sanitation sector by 8 percent, SME development sector by 7 percent and finance insurance sector by 5 percent.
Sri Lanka entered into several agreements with foreign nations and organizations in 2023 that attracted vast foreign funding.
January 1 to September 30, 2023, witnessed the government inking 13 agreements with foreign lending agencies and development partners and raising around $1,479 million as financing.
Aside from that, during the same period, Sri Lanka also received $114.2 million from the World Bank and $58 million from the Asian Development Bank (ADB).
