Govt. approves US $ 500mn project to improve agricultural supply chains

• Funding to come from IBRD of World Bank

The Cabinet of Ministers this week approved the ‘Inclusive Connectivity and Development Project’, which is to be implemented with US $ 500 million financial assistance from the World Bank (WB), with an aim to strengthen the agricultural supply chains in selected districts to provide a safe, efficient and climate-friendly road connectivity.

Highways Minister Johnston Fernando on Tuesday sought the approval of the Cabinet of Ministers to jointly implement the proposed project along with the Agriculture Ministry and to make a suitable mechanism for the implementation of the project.

Given that the country’s road network is responsible for around 95 percent of the passenger and about 98 percent of the freight transportation, the Government Information Department pointed out the existence of an uninterrupted road transport system as a crucial factor for the economic activities of rural areas.

According to the WB, the Project Development Objective (PDO) is to provide safe, efficient and climate-resilient connectivity and supply chain to empower project communities in Sri Lanka.

“The project development objective will be implemented through improved rural roads network, agro-logistics infrastructure and services as well as institutional strengthening that will ultimately help poverty reduction. Under the project, a priority list of rural roads will be improved and rehabilitated, along with improvements on ancillary infrastructure and services related to transport and agro-logistics,” the WB noted. 

Further, the project is expected to be implemented in two components, which include enhancing safe and climate-resilient transport connectivity and enhancing supply chain and access to services for farmers. 

The International Bank for Reconstruction and Development (IBRD) of the WB is proposed to provide the US $ 500 million financing requirement of the project and further US $ 70 million is proposed to be financed commercially through non-WB sources, according to project documents. 

The project is expected to commence next year.

The agriculture sector contributes 6.9 percent to the country’s GDP and employs approximately 27 percent of the population, who are highly vulnerable to variability of rainfall due to climate change. It also provides raw materials to the food and beverage manufacturing sectors, which brings the total contribution of the sector to around 26 percent of GDP.

In particular, the gaps in infrastructure and services have been identified as hindrances for the growth of the smallholder agriculture sector. Therefore, additional investments are required to realise the potential of its smallholder agriculture sector to further diversify into high value produce and effectively link farmers to markets. (NF)