ADB Approves $100M Loan to Enhance Sri Lanka's Power Sector Sustainability

To accelerate the adoption of renewable energy, the program will support several initiatives outlined in Sri Lanka’s renewable energy expansion plans for 2023–2030.

The Asian Development Bank (ADB) has greenlit a $100 million policy-based loan aimed at bolstering the financial sustainability of Sri Lanka's power sector. The loan, part of the Power Sector Reforms and Financial Sustainability Program, is designed to complement the International Monetary Fund's Extended Fund Facility arrangement and enhance the operational efficiency and competitiveness of the country's electricity landscape.

According to Jaimes Kolantharaj, ADB Principal Energy Specialist, the program focuses on developing cost-competitive renewable energy sources and ensuring a reliable and affordable electricity supply through a transparent and independent regulatory framework. These efforts are crucial for driving economic growth and navigating Sri Lanka through its current financial and economic challenges.

The program will facilitate reforms introduced under the Electricity Act, including institutional and regulatory enhancements, and improve the operational sustainability of the electricity sector. It aims to establish independent entities with clearly defined roles, strengthen corporate governance, and ensure financial stability. Regulatory reforms will be advanced through the implementation of a new national tariff policy, promoting tariff structures that reflect actual costs and support sector sustainability.

To accelerate the adoption of renewable energy, the program will support several initiatives outlined in Sri Lanka's renewable energy expansion plans for 2023–2030. This includes periodic adjustments to feed-in tariffs for small power plants and rooftop solar users, facilitating the integration of renewable energy projects into the national grid, and promoting competitive procurement frameworks for renewable energy initiatives.

Additionally, the program places emphasis on increasing women's participation in the power sector. It aims to develop policies that foster equitable involvement of female customers, entrepreneurs, and marginalized community groups.

In support of program implementation, ADB will allocate an additional $1 million technical assistance grant from its Technical Assistance Special Fund. This grant will focus on capacity building for electricity companies, assisting in the development of business and power system development plans.

The approval of this loan underscores ADB's commitment to supporting Sri Lanka's transition towards a sustainable and resilient power sector, aligned with the country's nationally determined contributions for clean energy development.