The Asian Development Bank (ADB) is finalizing proposed projects in Sri Lanka for next year and assured its support for the country’s development and its efforts to overcome economic and fiscal challenges.
ADB has been addressing immediate needs of the country, such as essential medical supplies, materials for water treatment, and working capital for small and medium-sized enterprises by reallocating surplus loan proceeds from ongoing loans.

Vice President of Asian Development Bank (ADB) Shixin Chen now in Sri Lanka stated this when he called on Prime Minister Dinesh Gunawardena yeaterday (Dec. 5) at the Prime Minister’s Office in Colombo

Mr. Shixin Chen said the ADB could provide technical assistance in addition to project support.

He noted that international monetary agencies are highly impressed with the strength of the Sri Lankan leadership and its commitment to achieve speedy economic revival through reforms in monetary sectors, the PM’s Office reported.

The Asian Development Bank (ADB) has provided US $ 750 million as concessional loans last year. Mr. Asakawa said that loans worth US $ 2 billion would be allocated for operational projects this year.

To date, the Asian Development Bank (ADB) has committed 479 public sector loans, grants, and technical assistance totaling $11 billion to Sri Lanka. Cumulative loan and grant disbursements to Sri Lanka amount to $8.64 billion.

These were financed by regular and concessional ordinary capital resources, the Asian Development Fund, and other special funds. ADB’s ongoing sovereign portfolio in Sri Lanka includes 46 loans and 2 grants worth $4.4 billion.

The Prime Minister briefed him about the steps taken by the government to revive the economy and to enact reforms in fiscal sectors as well as to restructure energy, electricity and petroleum sectors, the ADB statement said.

ADB Vice President stressed the need for controlling inflation and to protect vulnerable, under-privileged sections of the society.

The Prime Minister explained the programmes aimed at protecting the vulnerable groups of the society and rural agricultural development plans to increase production and increase export of surplus.

The Prime Minister thanked the ADB for emergency assistance loans and grants provided during Covid-19 pandemic as well as during the current economic difficulties.

He said the ADB supported projects provide crucial support to the government in extending assistance to vulnerable groups and restoring the livelihood of the poor and vulnerable, including farmers.

The draconian measures introduced by the Government and Central Bank have begun to demonstrate positive results.- Inflation is abating and essential imports are being financed. Interest rates should begin to ease (strong guidance from the Governor). The very high premiums in the forex market has diminished. former central bank governor Dr Indrajit Coomaraswamy discoursed.
In January to September 2022, revenue collected exceeded the revenue for 2021 there has been good control of recurrent expenditure and capital expenditure has been contained by a lack of foreign exchange, he said.

Sri Lanka is only in the beginning of a very arduous and painful journey towards economic stability amidst fiscal crisis and it is now being called upon to do something it has not been able to achieve to date,

He said that the country has to stabilize the economy with prudent macroeconomic policies while introducing structural reforms that drive sustainable growth and higher value employment.

The low level equilibrium is being achieved at the expense of severe economic contraction. Growth is projected to contract by 8 to 9 percent in 2022. GDP is not expected go back to its 2021 level till 2025 or 2026, he predicted.

The current level of economic contraction cannot be sustained for very long without disturbing social and political ramifications, he said adding that up to now, Sri Lanka has not been able to make significant headway towards the economic transformation needed to increase productivity and create an export driven high growth economy.

Delivering the Sujata Jayawardena memorial oration , Cambridge-educated old Royalist Dr. Coomaraswamy who restored the credibility of the Central Bank and brought professionalism back to the institution eloquently elaborated “Economic Crisis : Where are we, and where do we go from here ?”.

This premier annual event of the Colombo University hosted for the 17th consecutive year by the Alumni Association of the University was held at the BMICH in Colombo this week in memory of its illustrious Past President the late Sujata Jayawardena who rendered immense service to the University.
While emphasizing the independency of the monetary authority, he categorically stated that the Central Bank should not be considered as a state owned development bank

Flexible inflation targeting ( FIT) is expected to be embedded in the new Central Bank Bill. This will increase predictability and consistency while discouraging the type of fiscal dominance we have seen recently, he pointed out.

The new Bill will also prevent the CB from participating in the primary auctions for Treasury Bills. This is the most destructive form of money printing.

After Monetary Board banned the CB from participating in primary auctions, in 2017, there were primary surpluses in the budget in 2017 and 2018.

He noted that that the International Monetary Fund’s (IMF) prescription for economic reforms is not pleasing and that the people will have to essentially curtail their investment and consumption tightening their belts.

He said “Going to IMF is like going to a doctor. You go there when you become sick. So you can’t then blame the doctor for giving medicines that’s bitter. That is what a doctor is intended to do.”

Dr. Coomaraswamy disclosed that Sri Lanka is discussing with the World Bank and the Asian Development Bank (ADB )to get loans of USD 1.9 billion after a reform program with IMF is approved.

Sri Lankans, whose real incomes are getting hammered on a daily basis from soaring inflation, have turned to their credit cards, as there was a significant jump in the outstanding balance of credit cards in October from a month ago, when the financial and economic misery became more pronounced.

Outstanding credit card balance has dipped by a little in October in a dual sign that banks may be tightening their credit card standards while consumers are also pulling back on their spending without taking on any more debt as they are fighting the worst cost of living crisis in their lifetime.

The data for the month showed that the outstanding credit card balance had slipped by Rs.64 million in October to Rs.136.7 billion after slowing down in September.

The trajectory of the credit card balance is counterintuitive where consumers tend to take on more credit card debt to finance their purchases when their incomes become insufficient to meet their monthly household expenses after consumer prices spiked to 70 percent when the economic crisis fired runaway inflation since April this year.

With the October data on card balances, the total outstanding card balance of the licensed commercial banking sector stood at Rs.136.7 billion, an increase of just Rs.3.4 billion in the 10 months.

The card balance also reflects how tight the credit conditions have become in a matter of months after the Central Bank turned extremely aggressive tightening the monetary policy prompting banks to raise their interest rates up to 36 percent on cards, effectively doubling where it was before the crisis unfolded.

Besides, some banks also started slashing the card limits citing the worsening macroeconomic conditions to limit card spend in a bid to contain a possible fallout from potential defaults.

Despite the dent in the outstanding card balance and the tight credit conditions, banks managed to issue 3,496 million new cards in October bringing the number of active cards in the system to 1,975,335.

However, offering a sigh of relief, the prices appear to be easing after back-to-back softening inflation reports in October and November, which signaled deceleration in food prices.

The inflation measured by the Colombo Consumer Price Index rose by an annual 61.0 percent in November, slowing from 66.0 percent in October while the so-called core prices, which leave aside the prices of mostly volatile food, energy and transport, eased to 49.4 percent annual rate, from 49.7 percent.