The Asian Development Bank (ADB) has approved a US$100 million financing package to help Sri Lanka consolidate its fragile economic recovery and strengthen fiscal stability after the worst financial crisis in the nation’s post-independence history.
The funding, which complements ongoing support under the IMF-led reform program, is aimed at improving fiscal governance, enhancing revenue collection, and encouraging private sector participation three pillars seen as essential to sustain the country’s long-term recovery.
Announcing the initiative, ADB Country Director for Sri Lanka Takafumi Kadono said the country had made “commendable progress in restoring fiscal and debt sustainability” following its 2022 economic collapse. “We will work closely with the government to promote inclusive, sustainable growth by strengthening fiscal governance and building a more efficient, accountable, and resilient public sector,” he added.
Strengthening Fiscal and Revenue Systems
The new ADB-backed program will focus on streamlining public expenditure to ensure better use of limited state resources. This includes digitalizing and reforming budgetary processes, reducing waste, and introducing stronger audit and monitoring systems to make public spending more transparent and efficient.
On the revenue side, Sri Lanka will receive support to strengthen domestic and international tax compliance through a multi-year tax improvement strategy. The program will also build on the country’s recent entry into the Global Forum on Transparency and Exchange of Information for Tax Purposes, helping authorities track cross-border tax evasion and broaden the revenue base.
Kadono noted that strengthening tax administration is vital for Sri Lanka to reduce reliance on borrowing. “Sustainable revenue growth is the backbone of long-term fiscal discipline,” he emphasized.
Empowering the Private Sector and SOEs
ADB’s program also targets the creation of a predictable investment climate by developing a new legal framework for public private partnerships (PPPs) that aligns with international best practices. This framework is expected to attract private investment into infrastructure and public services while reducing the financial burden on the state.
Moreover, the initiative will strengthen state-owned enterprise (SOE) oversight by introducing a credit risk framework and specialized monitoring units steps that aim to increase accountability and reduce fiscal risks posed by loss-making SOEs.
Climate and Gender Focus
The ADB package introduces first-time reforms such as a Fiscal Risk Statement and a national climate finance strategy to mobilize green investment. It also embeds gender-sensitive budgeting and reforms in public procurement to make national development both inclusive and equitable.
A Long Road to Stability
Economists view the ADB’s latest package as timely, given Sri Lanka’s ongoing challenges in debt restructuring, foreign reserve buildup, and fiscal reforms. While macroeconomic indicators have improved since 2023, sustained external support and disciplined policy implementation will be key to ensuring recovery translates into broad-based growth.
Founded in 1966, the Asian Development Bank, owned by 69 member countries, remains one of Sri Lanka’s most consistent development partners. With this latest initiative, ADB signals its continued confidence in Sri Lanka’s reform path one aimed at transforming fiscal resilience into real economic opportunity
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