ADB optimistic about reforms but warns of limited room to manoeuvre

• 5opn1
• November 5, 2024
• Banking and Financial
• Asian Development Bank
• 0 Comments

• Expects new government to focus on a more equitable burden-sharing strategy protecting needy
• Observes positive signs of continuity in reform programmes and policies
• Its 2024-2028 Country Partnership Strategy aims achieving sustainable recovery

The Asian Development Bank (ADB) said that it remains optimistic about the continuity of the reforms in Sri Lanka but warns that there is very little room to manoeuvre as the country seeks a sustainable recovery.

Speaking to Mirror Business, ADB Country Director Takafumi Kadono noted that the institution expects shifts in the new government’s approach to reform programmes, particularly with a focus on achieving a more equitable burden-sharing strategy to protect the poor and vulnerable.

While this approach includes a dual focus on increasing revenue while managing expenditure, he affirmed that the government seems to have an understanding of the challenges involved.

“I think the government is trying to find ways to increase revenue through many other means. If that is possible, then the primary balance target of 2.3 percent in 2025, under the International Monetary Fund’s (IMF) Extended Fund Facility (EFF), could be met,” Kadono said.

“However, the room for manoeuvre is very limited and I think the government has that understanding,” he added.

With Sri Lanka now a month past the presidential election with a new administration in place, he shared that the ADB has observed positive signs of continuity in various reform programmes and policies.

He emphasised that the bank’s five-year Country Partnership Strategy for the period 2024-2028 would continue to focus on achieving a sustainable recovery, resilience and growth for the island nation.

Approved in March this year, the strategy outlines three strategic objectives for Sri Lanka, such as the strengthening of public financial management and governance, promoting private sector development for green growth and enhancing access to climate-smart public services while deepening social inclusion.

“We understood that in the case of Sri Lanka, there is currently no medium-term socioeconomic development plan. However, we consulted with the government, private sector, civil society organisations, academia and other development partners to identify the areas where we can add value. We believe that, with the new administration, our approach and strategy still remain valid,” Kadono said.

“While there will be some changes, our focus is to ensure that any changes made will still lead to the same objective of sustainable recovery, resilience and growth,” he asserted.