ADB Approves $100M to Strengthen Sri Lanka’s Fiscal Stability and Growth

Announcing the program, ADB Country Director for Sri Lanka Takafumi Kadono praised the government’s efforts to restore financial order and rebuild confidence in the nation’s economy.

The Asian Development Bank (ADB) has approved a $100 million financing package to support Sri Lanka’s continued progress toward macroeconomic stability and sustainable growth in the aftermath of its severe economic crisis. The initiative will focus on improving fiscal governance, enhancing revenue mobilization, and stimulating private sector participation — key pillars for long-term stability and inclusive development.

Announcing the program, ADB Country Director for Sri Lanka Takafumi Kadono praised the government’s efforts to restore financial order and rebuild confidence in the nation’s economy.

“Sri Lanka has made commendable progress in restoring fiscal and debt sustainability following an unprecedented economic crisis,” Kadono said. “ADB will continue working closely with the government to strengthen fiscal governance, ensure efficient public expenditure, and foster a transparent and accountable public sector.”

He added that the program would also support domestic resource mobilization, better budget execution, and a predictable investment climate conducive to private sector growth.

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Strengthening Fiscal Governance and Transparency

The ADB program aims to improve efficiency and transparency in public expenditure management by modernizing how the government plans, allocates, and utilizes public funds. This includes streamlining budgetary processes and introducing data-driven mechanisms for monitoring spending efficiency and accountability.

Such reforms are essential for a country that has faced fiscal stress and debt restructuring following the 2022 economic collapse, when shortages of fuel, food, and foreign exchange brought Sri Lanka’s economy to a standstill. With fiscal discipline now being gradually restored, ADB’s support will ensure that public funds are directed to high-impact areas such as social protection, infrastructure, and green growth.

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Boosting Revenue Mobilization through Tax Reforms

A major component of the financing will be dedicated to strengthening revenue collection systems, both domestic and international. ADB will help the government develop and implement a multi-year tax compliance improvement strategy, building on recent tax reforms aimed at widening the base and improving compliance.

To complement this, Sri Lanka will deepen international tax cooperation, particularly following its membership in the Global Forum on Transparency and Exchange of Information for Tax Purposes. This will allow authorities to better track cross-border financial flows and combat tax evasion — crucial for expanding fiscal space and reducing dependence on debt.

By increasing revenue transparency and accountability, ADB expects these reforms to raise the credibility of Sri Lanka’s fiscal policy and enhance investor confidence in the country’s economic trajectory.

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Empowering the Private Sector and Promoting PPPs

Recognizing that sustainable growth depends on a dynamic private sector, the ADB program will also support reforms to encourage investment and entrepreneurship. A central feature is the development of a modern legal and institutional framework for public–private partnerships (PPPs) aligned with international best practices.

This framework will help attract private and climate finance to large-scale infrastructure and development projects, creating jobs and stimulating growth. By promoting transparent, competitive bidding and clear risk-sharing mechanisms, the PPP framework will also reduce the fiscal burden on the government.

In addition, ADB’s program will assist in strengthening state-owned enterprises (SOEs) through better corporate governance, financial monitoring, and risk management. The establishment of a credit risk assessment framework and specialized SOE monitoring units will improve oversight, reduce inefficiencies, and prevent fiscal slippage.

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Introducing First-Time Fiscal and Climate Reforms

The ADB-backed initiative also supports several first-of-their-kind reforms for Sri Lanka:

• A comprehensive Fiscal Risk Statement, enhancing transparency about government liabilities and contingent risks.

• A climate finance strategy to mobilize external and domestic resources for low-carbon and climate-resilient development.

• Sustainable Development Goals (SDG) budget tagging, linking government spending to measurable social and environmental outcomes.

• A gender-sensitive Nationally Determined Contribution (NDC), ensuring that women’s economic and social inclusion are integral to climate policy.

• Public procurement reforms designed to increase efficiency, reduce corruption, and support equitable development outcomes.

Together, these innovations aim to establish a more resilient and equitable fiscal system that integrates environmental sustainability and gender inclusivity into the heart of economic policymaking.

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Aligning with Sri Lanka’s Long-Term Economic Goals

The program supports Sri Lanka’s Medium-Term Fiscal Framework and aligns with its broader reform agenda under the IMF-supported Extended Fund Facility. ADB’s assistance will complement efforts to restore investor confidence, reduce debt vulnerabilities, and build macroeconomic resilience.

With the economy showing signs of stabilization — including easing inflation, gradual reserve recovery, and improved fiscal management — the ADB package comes at a crucial moment to sustain reform momentum and lay the foundation for inclusive growth.

“ADB’s partnership is more than financial assistance,” said Kadono. “It is about helping Sri Lanka transform its institutions, strengthen governance, and build an economy that is more inclusive, accountable, and sustainable.”

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ADB’s Commitment to Regional Stability and Resilience

Founded in 1966, ADB is one of Asia’s leading development partners, owned by 69 member countries — including 50 from the Asia-Pacific region. Its mission is to foster inclusive, resilient, and sustainable growth through financing, policy dialogue, and technical assistance.

In Sri Lanka, ADB has played a long-term role in infrastructure development, education, health, and financial sector reforms. This latest $100 million initiative reaffirms ADB’s ongoing commitment to helping Sri Lanka navigate its recovery while laying the groundwork for green, private sector-led growth in the years ahead.