World Bank set to approve $700 Million for Sri Lanka next week

The World Bank is likely to approve $700 million in budgetary and welfare support for Sri Lanka at its next board meeting on June 28, sources told Reuters, the biggest funding tranche for the crisis-hit island nation since an IMF deal in March.

The economy of the country of 22 million is expected to shrink 2% this year before returning to growth next year, the government estimates, following last year’s record contraction of 7.8% after foreign exchange reserves hit record lows.

The International Monetary Fund approved a bailout of nearly $3 billion in March, which Sri Lanka expects will bring additional funding of up to $4 billion from the World Bank, the Asian Development Bank and other multilateral agencies.

Of the proposed World Bank funding, $500 million will be for budgetary support and is likely to come in two tranches of $250 million each, one of the sources, from the World Bank, said.

All four sources, from the World Bank and the Sri Lankan finance ministry, sought anonymity as they were not authorised to talk to the media.

The first tranche is likely to be disbursed immediately after board approval with the next possibly in October, as the bank watches the progress of Sri Lanka’s debt restructuring and the first review of the IMF programme, due in September, the World Bank source added.

The remaining $200 million will be earmarked for programmes to assist the poor, whose numbers have doubled to 25% of the population since the onset of the Indian Ocean nation’s worst economic crisis early last year, another World Bank source said.

“Households that have registered for support will be ranked … and the lowest 2 million will be eligible for support,” the source added.

The World Bank and the finance ministry did not immediately respond to requests for comment.

(Reuters)