World Bank releases $250 mn to boost Sri Lanka reforms

People are walking and enjoying the street food at the Galle Face promenade in Colombo, Sri Lanka, on December 6, 2023. (Photo by Thilina Kaluthotage/NurPhoto) (Photo by Thilina Kaluthotage / NurPhoto / NurPhoto via AFP)

(AFP) - The World Bank said Wednesday it had released $250 million to support bankrupt Sri Lanka's tough economic reforms following last year's financial crisis.

Sri Lanka defaulted on its $46 billion external debt in April 2022 after running out of foreign exchange to finance essential imports of food, fuel and medicines, with civil unrest ousting then-president Gotabaya Rajapaksa.

His successor has been pressing tough austerity measures to help restore essential supplies.

The World Bank said it had released the second and final tranche of a total $500 million package "considering the continued satisfactory progress made by the government with the reform program".

Sri Lanka has doubled taxes, removed subsidies on fuel and electricity and introduced anti-graft legislation in line with a $2.9 billion bailout from the International Monetary Fund.

The IMF released the second tranche of $337 million of its four-year bailout last week, after the country secured a debt restructuring deal with its main bilateral lender China.

The economy grew in the September quarter, marking the first expansion since the foreign exchange crisis.

The Central Bank of Sri Lanka said the economy had grown by a modest 1.6 percent in the quarter ending September, up from a contraction of 11.5 percent a year earlier.

Despite the positive data, overall figures from the first nine months of the year showed a contraction of 4.9 percent.

The IMF has forecast Sri Lanka's full-year GDP growth in 2023 at negative 3.6 percent.

© Agence France-Presse