ADB chief pledges more funding; wants better fiscal management

• To upscale financial assistance to US $ 2bn for 2016-2018
• ADB ‘re-orienting’ approach to meet evolving Lankan needs
• Focus to shift to higher quality transformative infrastructure

By Shabiya Ali Ahlam
Impressed with the changes witnessed in the economy that is in the hands of a unity government, visiting Asian Development Bank (ADB) President yesterday said his institution was prepared to upscale its lending to support the nation’s development agenda, but stressed more work was required on the country’s fiscal consolidation front.

“With the changes observed in the country, we are upbeat in strengthening our support to the country. This comes from inclusive growth, better governance and private sector development. With the wealth of cultural heritage, rich natural resources and human resources Sri Lanka is a country with lot of potential,” said ADB President Takehiko Nakao, addressing the media in Colombo.

Nakao said he met with President Maithripala Sirisena, Prime Minister Ranil Wickremesinghe and Finance Minister Ravi Karunanayake, to whom he pledged ADB’s support to the country’s continued development. 

Reaffirming commitment, Nakao said the ADB would upscale its financial support to the country over US $ 2 billion for the 2016-2018 period. 

The allocation is a 30 percent increase compared to the $ 1.5 billion extended in the last three years. With this, Sri Lanka would see annual lending from ADB expanding to US $ 700 million from the previous US $ 500 million. 

It was said that the US $ 700 million would be further extended if the need for fiscal measures are justified.

Sounding a note of optimism on the local prospects, Naoko expressed confidence in Sri Lanka reaching the upper middle income status in the coming years, provided that the government continues its reform efforts and addresses the issues relating to macro-economic stability. 

For this Nakao said the ADB is “re-orienting” its operations to meet the evolving needs of Sri Lanka.

Until recently, ADB has focused on improving basic infrastructure such as national and provincial roads, electricity transmission lines and urban and rural water supplies in Sri Lanka. 

In the coming three years a shift is expected to be observed as the agency’s assistance will be further expanded to support higher quality transformative infrastructure which would include expressways, railway upgrades, wind power generation and building economic corridors to accelerate industrialization.

With regard to fiscal consolidation, the key issue standing against the stability of the economy, Nakao emphasized more work is mandatory.

“We urge the government to take prudent measures to address fiscal deficit alongside reducing the budget deficit and raising revenue,” he said, while pointing out Sri Lanka’s revenue levels are low by international and regional standards.

Noting that macroeconomic management should go hand in hand with structural reforms, he stressed the latter is critical to ensure steady employment creation and the country’s entry into the global value chain. 

Nakao also stressed the importance of attracting greater foreign direct investment (FDI) to support the robust economic growth. Recommending immediate action the government should take, he encouraged policy makers to continue discussion with the International Monetary Fund (IMF) on obtaining a new facility. In his two day visit that would end today, Nakao is scheduled to visit two ADB-financed projects, the Galle Grid and the Southern Expressway.

Support comes at right time: Ravi K

Finance Minister Ravi Karunanayake yesterday said the country’s economy would soar to greater heights if the ADB continued to extend its support in the current momentum.

“The support of ADB comes at a time when the government inherited an economy that has insufficient revenue. We appreciate the efforts.  Together I am sure, we can sense victory before too long,” said Karunanayake following the signing an SME loan agreement with the ADB President. 
 

Stating that there has been a “spectacular” change last year after the economy came to the hands of the unity government, he pointed out the new regime has served its purpose and has been successful in placing Sri Lanka on the world stage.

Karunanayake went on to say that despite turbulence in the global economy, the government has ensured that good governance would continue even though tough times are experienced in the local landscape.