ADB Supports Sri Lanka with $100 Million Loan for Power Sector Reforms
The Asian Development Bank (ADB) has approved a $100 million policy-based loan to support reforms in Sri Lanka’s power sector. This initiative aims to enhance the financial sustainability of the power sector, improve operational efficiency, and attract private investments.
Program Goals
The program will help create a favorable environment for private investments, boost renewable energy development, and modernize power grids. ADB Principal Energy Specialist Jaimes Kolantharaj stated, “Developing cost-competitive renewable energy and providing reliable and affordable electricity supply–with a transparent and independent power sector regulatory framework–will help Sri Lanka drive economic growth and address the current financial and economic crisis.”
Key Initiatives
The program will support regulatory reforms, including the implementation of a new national tariff policy to improve financial sustainability through cost-reflective tariffs. It will also assist in accelerating investments in renewable energy through various initiatives under the renewable energy expansion plans for 2023-2030. These initiatives include:
- Periodic revision of feed-in tariffs for small power plants and rooftop solar users
- Facilitating the integration of renewable energy projects into the national grid
- Effective application of a competitive procurement framework for renewable energy projects
Additionally, ADB will provide a $1 million technical assistance grant to support these power sector reforms.
Economic Context
Sri Lanka’s economy is stabilizing after a severe financial crisis in 2022, triggered by depleting foreign exchange reserves. The island nation defaulted on its overseas debt in May 2022, marking its worst financial crisis since Independence. However, the economy has shown signs of recovery in recent months.
