Sri Lankan crisis: The World Bank has granted USD 700 million in financing to assist Sri Lanka in recovering from the current economic crisis and providing relief to the poor and vulnerable people in the island nation. Notably, this is the biggest funding tranche since the IMF deal of USD 2. 9 billion in March this year. Cash-strapped Currently, Sri Lanka is experiencing the worst economic crisis in its history.
According to reports, the GDP shrank by more than 7% in 2022 as a result of widespread mass protests across the island countries that also resulted in the political expulsion of the country's influential Rajapaksa family.
The Washington-based bank said in a press statement that the World Bank Board of Directors on Wednesday approved USD 700 million in financing to aid Sri Lanka in overcoming its current economic crisis and providing assistance to the poor and vulnerable. This sum has been divided into USD 200 million for social security and USD 500 million for fiscal support.
IMF's bailout programme to aid Sri Lanka
In March, the IMF approved a USD 3 billion bailout programme to help Sri Lanka overcome its economic crisis and catalyse financial support from other development partners, a move welcomed by Colombo as a "historic milestone" in the critical period.
Sri Lanka has been hit hard by a catastrophic economic and humanitarian crisis, sparked by years of mismanagement and the raging pandemic.
The World Bank said its Board of Directors approved USD 700 million in financing for two operations to help Sri Lanka implement foundational reforms that restore macroeconomic stability and sustainability, mitigate the impact of current and future shocks on the poor and vulnerable, and support an inclusive and private-sector-led recovery and growth path.
What is Sri Lanka's RESET?
The Sri Lanka Resilience, Stability and Economic Turnaround (RESET) Development Policy Operation (USD 500 million) will support reforms that help improve economic governance, enhance growth and competitiveness, and protect the poor and vulnerable. It will provide budget support in two equal tranches against agreed prior actions, it said.
The World Bank Wednesday announced that its Board of Directors discussed the new Country Partnership Framework (CPF) for Sri Lanka, which aims to help restore economic and financial sector stability and build a strong foundation for a green, resilient, and inclusive recovery.
This CPF comes at a time when the country is navigating a severe economic crisis that is having devastating impacts on people’s lives and livelihoods and which demands deep reforms to stabilize the economy and protect the poor and vulnerable.
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Sri Lanka’s poverty rate doubled
It should be mentioned here that Sri Lanka’s poverty rate is estimated to have doubled from 13.1 to 25 per cent between 2021 and 2022—an addition of 2.5 million poor people—and is projected to increase by another 2.4 percentage points in 2023.
(With inputs from PTI)
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