ADB approves $100 million loan for Sri Lanka’s energy sector reforms

Manila: The Asian Development Bank (ADB) has approved a $100 million loan to support and facilitate reforms in Sri Lanka, aimed in particular at increasing the financial stability of the island nation’s energy sector.

The Energy Sector Reform and Financial Sustainability Programme will complement the International Monetary Fund’s Expanded Financial Support Programme and strengthen the operational efficiency and competitiveness of the island nation’s energy sector, according to a July 11 communiqué from the regional development bank.

This programme will help create a favourable environment for private investment, supporting the development of renewable energy sources and modernising energy networks.

“Developing competitively priced renewable energy sources and ensuring reliable and affordable electricity supplies – with a transparent and independent energy regulatory framework – will help Sri Lanka boost economic growth and cope with the current financial and economic crisis,” said Jaimes Kolantharaj, ADB’s Chief Energy Officer.

“The programme will also support the development of renewable energy to accelerate the country’s transition to clean energy, in line with Sri Lanka’s Nationally Determined Contributions.”

It will support regulatory reforms by implementing a new national tariff policy that will improve the financial stability of the sector through cost-reflective tariffs.

To accelerate renewable energy investments, the programme will support a number of initiatives under the renewable energy expansion plans for 2023-2030. Key initiatives include implementing a periodic review of feed-in tariffs for small-scale power plants and rooftop solar users, facilitating the integration of renewable energy projects into the national grid, and effectively applying a competitive procurement framework for renewable energy projects.

The ADB said it will provide an additional $1 million technical assistance grant from its Special Technical Assistance Fund to support energy sector reforms in the island nation.

The island nation’s economy is stabilizing after a crippling financial crisis in 2022 that was triggered by depleting foreign exchange reserves. Sri Lanka faced a severe economic crisis as a result of past policy mistakes.

Since then, the country’s economy has begun to show signs of recovery.

The island nation defaulted on its foreign debt in May 2022 after depleted foreign reserves triggered its worst financial crisis since independence.