World Bank’s IFC extends US $ 400mn financing to three Sri Lankan banks

From left: IFC Sri Lanka and the Maldives Country Manager Alejandro Alvarez de la Campa, Central Bank Governor Nandalal Weerasinghe, Sampath Bank Managing Director Nanda Fernando, Commercial Bank of Ceylon Managing Director/Chief Executive Officer Sanath Manatunge, Nations Trust Bank Chief Executive Officer Hemantha Gunetilleke and IFC Portfolio Manager Financial Institutions Group for South Asia Joon Young Park

• Financing provided by way of cross-currency swap facility to ComBank, Sampath and NTB
• Three banks expected to use funds to facilitate imports of essential goods and financing of exports of goods and services for their clients
• During COVID pandemic IFC invested over US $ 830mn in Sri Lanka to help sustain biz and livelihoods

To support Sri Lanka amid an ongoing economic crisis, the International Finance Corporation (IFC), the investment arm of the World Bank, is providing a cross-currency swap facility to three of Sri Lanka’s leading national banks that deal with over 30 percent of Sri Lanka’s remittances and exports.  

The IFC facility will provide US $ 400 million over one year to Commercial Bank of Ceylon, Nations Trust Bank (NTB) and Sampath Bank, to help facilitate imports of essential goods—food, medicine, fertilisers—most of which are traded in US dollars. 

The facility will further support the banks financing of exports of goods and services for their clients while allowing them to make US dollar-denominated debt repayments.  

Sri Lanka has been facing its worst economic crisis in decades. The country’s output is estimated to have fallen by 9.2 percent in 2022 and drop a further 4.2 percent in 2023. 

“In our almost 20-year relationship, the IFC has engaged extensively with us to help grow our operations, including new opportunities in trade, climate finance, small and medium enterprises and was also instrumental in establishing our comprehensive women banking portfolio. This new facility will help us deploy our foreign currencies more efficiently, while lowering our foreign currency exposure, resulting in effective risk mitigation,” said Commercial Bank of Ceylon Managing Director/Chief Executive Officer Sanath Manatunge. 

“Sri Lanka’s economy continues to feel the severe US dollars funding constraints. The IFC’s cross-currency swap facility will provide critical forex liquidity, helping support the private sector and encouraging longer-term funding flows to the market,” said IFC Portfolio Manager Financial Institutions Group for South Asia Joon Young Park. 

“We expect this financing to boost confidence in the investor community, attract fresh capital inflows to support the Sri Lankan economy. We are also working on further plans to support our client banks with other long-term funding and advisory services in the future,” he added. 

This new swap facility follows the reactivation of trade finance lines with the IFC partner banks—under the Global Trade Finance Programme—in January 2023, which have been cautiously managing their risks in a challenging operating environment. 

With this facility, Commercial Bank and Sampath Bank will now be able to improve access to medium and long-term finance for their clients, helping local businesses sustain operations. 

“The IFC’s support through the cross-currency swap facility is timely, given the liquidity stress faced by the industry and the overall economy. This transaction will strengthen our efforts to increase foreign currency lending to our key client groups and thereby support economic revival across key industry sectors,” said NTB Chief Executive Officer Hemantha Gunetilleke.

“The facility provided by the IFC comes at a juncture where the Sri Lankan economy is facing a challenging time. The transaction will enable Sampath Bank to better manage our foreign currency holding by borrowing at lower rates and manage our foreign currency exposure, while facilitating foreign currency lending to our customers across the whole economy,” said Sampath Bank PLC Managing Director Nanda Fernando. 

This facility is aligned with the IFC’s work in Sri Lanka over the past five decades. This includes the IFC’s strong countercyclical role in Sri Lanka during the COVID pandemic, where the IFC invested over US $ 830 million, providing the much-needed long-term capital and trade financing to help sustain businesses and preserve jobs.