ADB’s new strategy puts spotlight on SL’s macroeconomic stability

The Asian Development Bank (ADB) yesterday announced the launch of a new country partnership strategy (CPS)

for Sri Lanka covering the period 2024–2028. 
The strategy will focus on restoring the country’s macroeconomic stability, reviving growth, and establishing the foundation for sustainable recovery and resilience.

This new partnership strategy will build on ADB’s ongoing assistance to support the country’s efforts to restore macroeconomic stability, and to achieve green and long-term sustainable growth.

“The CPS responds to Sri Lanka’s economic situation by tailoring ADB assistance to address the country’s long-standing macroeconomic imbalances and structural impediments through knowledge solutions, policy advisory support, and priority investments,” said ADB Country Director for Sri Lanka Takafumi Kadono. 

ADB’s assistance under the new CPS for Sri Lanka will focus on three strategic objectives: (1) strengthening public financial management and governance; (2) fostering private sector development promoting green growth; and (3) improving access to climate-smart public services and deepening inclusion. 

Three thematic priorities—climate action, disaster resilience and environmental sustainability; gender equality and social inclusion; and governance, capacity development, and digitalisation—will be integrated into the new CPS strategic objectives.

The new CPS will support the country’s efforts to tackle the key underlying causes of the crisis. ADB will focus on reforming public financial management system, strengthening governance, accelerating domestic resource mobilisation, and improving fiscal and debt sustainability, as well as measures to improve the performance of state-owned enterprises.

The strategy recognises the critical role of the private sector in the country’s recovery and long-term economic growth. Structural reforms to promote greater private sector participation in the economy and diversify the economy with emphasis on green and sustainable growth will be supported under the new strategy. 

ADB said it will continue to support financial inclusion and small and medium-sized enterprises development, especially those managed by women, and provide advisory and capacity building support to promote trade and investment. The strategy aims to improve access to climate-smart public services and deepen inclusion through strengthening social protection and human capital development and fostering agriculture modernisation.

The ADB noted that Sri Lanka is showing signs of stability and recovery from a deep economic crisis. Sri Lanka’s inflation significantly declined from 69.8 percent to 4.0 percent between September 2022 and December 2023. Foreign exchange reserves have increased to US$ 4.4 billion in 2023 from US$1.9 billion in 2022. 

Sri Lanka’s economic growth returned to positive territory in the second half of 2023 and that momentum is likely to continue, ADB said.
As of the end of December 2023, ADB had committed more than US$3.7 billion in 45 public sector loans and grants in Sri Lanka, as well as US$ 25.6 million in private sector investments.