Sri Lanka Doubles Access to Funds from World Bank amid Rising Incomes

18th December 2010, www.lankabusinessonline.com

Sri Lanka has qualified to get loans from a higher cost window of the World Bank amid rising incomes, which will double access to annual funds, managing director Ngozi Okonjo-Iweala said.

Sri Lanka has been a so-called IDA (International Development Association) concessionary credit recipient at low interest rates, long tenors and grace periods and a high grant element.

The country will now also get International Bank of Reconstruction and Development Bank (IBRD) which will double access to loans from 200 to about 400 million US dollars, the World Bank said.

Sri Lanka will continue to be eligible to IDA credit as a 'blend' country.

"Sri Lanka’s remarkable rise from past challenges is a testament to the tenacity of the Sri Lankan people and the commitment of the country’s leadership," Okonjo-Iweala said in a statement.

"Eligibility for IBRD borrowing is an important recognition of Sri Lanka’s middle income country status and signals an important step in the evolution of our relationship going forward – a relationship that is founded on knowledge and experience-sharing that complements the available financing."

Sri Lanka has a relatively high per capita income of over 2,000 US dollars a year for two years and has a declared aim of reaching 4,000 US dollars by 2016.

Analyst says Sri Lanka also has also stopped currency depreciation and checked high levels of inflation, the principle means of expropriating the real income of wage earners and savings of old people to finance a 'welfare state', that was devised in the mid 1930s.
Sri Lanka also now has access to capital markets. Countries with access to capital markets and which are deemed creditworthy and also has higher per capita income will 'graduate' out of IDA financing and eventually move to IBRD loans.

World Bank has started lending to Sri Lanka by financing a hydro power plant in 1954 and is now operating 17 projects world 1.25 billion US dollars.

It has also increasing access to capital markets.

Last year Sri Lanka raised a billion US dollars through a sovereign bond. The country has also been borrowing heavily from China through export credits, volumes of which are dwarfing traditional lenders like the World Bank and Japan.

Earlier this month Sri Lanka announced two new loans from two Chinese banks worth 760 million US dollars.