World Bank approves $1 billion loan to Sri Lanka for economic recovery

The World Bank has approved a $1 billion loan to Sri Lanka on Wednesday in order to revive the country's agriculture, tourism, and energy sectors after 2022 economic crisis, news agency AFP reported.Sri Lanka's economy collapsed in 2022 after it exhausted its foreign reserves, leaving it unable to import essential goods like food, fuel, and medicine. The financial meltdown triggered widespread protests, eventually leading to the resignation of then-President Gotabaya Rajapaksa. His successor, Ranil Wickremesinghe, secured a $2.9 billion bailout from the International Monetary Fund (IMF), helping stabilize revenues and allowing for a restructuring of the country’s $46 billion in foreign debt following its default in April 2022.The World Bank’s new loan, to be disbursed over three years, is designed to boost local industries and attract private investment, the Bank said in a statement following a meeting between World Bank President Ajay Banga and Sri Lankan President Anura Kumara Dissanayake in Colombo.“With progress underway to stabilize the economy and restart growth, core elements for job creation are in place,” Banga stated. He emphasized that now is the time to push ahead with reforms and create conditions that support private enterprise, especially in sectors with high employment potential.Despite signs of recovery, the World Bank recently warned that poverty remains widespread across the country. Sri Lanka's economy registered 5.0% growth in 2024 — surpassing the Bank’s earlier projection of 4.4% and marking its first year of expansion since the crisis.The IMF cautioned that the country’s recovery could be jeopardized if the US reinstates punitive tariffs. The United States is Sri Lanka’s largest export market, accounting for nearly 25% of its $12 billion in merchandise exports. A 44% "reciprocal tariff" imposed by Washington was temporarily suspended for 90 days, and Colombo has appealed for negotiations rather than retaliation.