The Asian Development Bank (ADB) has doubled its financing for Sri Lanka’s trade and investment reform programme to US$ 200 million, adding a US$ 100 million buffer to help the economy absorb pressures stemming from the conflict in the Middle East.
The additional financing puts the spotlight on the growing risks confronting Sri Lanka’s economic recovery as instability in the Middle East threatens to raise import costs and disrupt key foreign exchange inflows.
The funding will be channelled through ADB’s Trade, Investment and Industry Development Programme, which seeks to modernise trade systems, improve the competitiveness of small and medium-sized enterprises and attract investment into economic zones.
The reforms are expected to help Sri Lankan businesses expand, enter export markets and integrate into regional and global value chains. ADB said the programme would also support job creation and strengthen private sector-led growth.
More importantly for an economy still rebuilding its external buffers, the programme seeks to diversify Sri Lanka’s export base and reduce its vulnerability to future global shocks.
“We are moving quickly to protect more than one million struggling households in Cambodia while helping Sri Lanka create jobs, attract investment and expand trade,” ADB President Masato Kanda said.
“These investments will help both countries withstand today’s pressures and emerge stronger from the next shock.”
Sri Lanka’s financing forms part of a broader US$ 450 million package being deployed by ADB to shield Sri Lanka and Cambodia from the economic fallout of the Middle East conflict.
Cambodia will receive the remaining US$ 250 million to fund temporary fiscal measures and protect social spending.
Additional financing from the Asian Infrastructure Investment Bank and the Japan International Cooperation Agency could raise the total support available to Cambodia to US$ 688 million.
