World Bank Approves $150 Million to Strengthen Sri Lanka’s Financial Sector

November 13, 2023

The World Bank has recently approved a substantial financial assistance package of USD 150 million to bolster Sri Lanka’s financial and institutional sectors. This support comes at a crucial time as the country grapples with a severe economic crisis.

Addressing Sri Lanka’s Economic Crisis

Sri Lanka has been facing an unprecedented economic crisis, marked by dwindling foreign exchange reserves and public protests due to shortages of essential commodities like fuel and fertilizers. The World Bank recognizes the urgency of the situation and has stepped in to provide assistance.

The Importance of a Strong Banking Sector

A stable and reliable banking sector is essential for any economy. It not only supports businesses and individuals but also helps small businesses and impoverished households. Faris Hadad-Zervos, the World Bank Country Director for Maldives, Nepal, and Sri Lanka, emphasizes the significance of a robust financial sector in Sri Lanka’s recovery.

Approval of Financial Assistance

The World Bank Executive Board approved the USD 150 million financial assistance package to Sri Lanka. This substantial amount will be instrumental in strengthening various aspects of the country’s financial system.

Protecting Depositors and Building Confidence

One of the key components of this financial assistance is the enhancement of the Deposit Insurance Scheme. This measure aims to safeguard the savings of smaller depositors, including women and rural residents, while also boosting confidence in Sri Lanka’s financial system.

The Financial Sector Safety Net Project

The Financial Sector Safety Net Project focuses on bolstering the financial and institutional capacity of the Sri Lanka Deposit Insurance Scheme (SLDIS). This scheme, managed by the Central Bank of Sri Lanka, plays a critical role in ensuring the security of deposits in the country.

Managing External Debt

Sri Lanka is currently burdened with a total foreign debt of USD 46.9 billion. The need for a “rapid and sufficiently deep external debt restructuring” has been highlighted by global money lending agencies. The country’s efforts to manage external debt and regain the confidence of creditors are crucial for its economic recovery.

Preparing for the Future

As Sri Lanka anticipates the release of the second tranche of the International Monetary Fund’s bailout package, President Ranil Wickremesinghe has emphasized the importance of servicing external credit with interest. This will be a central focus of the budget for 2024, set to be presented in Parliament on November 13.

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