The World Bank and the Government of Sri Lanka signed the Second Resilience, Stability, and Economic Turnaround (RESET) Development Policy Operation (DPO) yesterday, securing an additional $200 million in support. This marks the second installment of a two-part series that began in 2022, following the initial $500 million disbursed in June and December 2023.
The aim of the Second RESET DPO is to facilitate reforms that improve economic governance, enhance growth and competitiveness, and protect the country’s poor and vulnerable populations, thereby building resilience and promoting an equitable economy in Sri Lanka.
Key reforms include the enactment of a new Public Debt Management Act to inform borrowing decisions more effectively, tax administration reforms to increase revenue, and measures to address financial sector risks by tightening single borrower limits and improving mechanisms for handling non-performing loans. To elevate living standards and stimulate private sector development, the operation also includes amendments to the Telecommunications Act and a new Electricity Act, along with initiatives to boost export competitiveness by phasing out para-tariffs and reducing customs duties.
A crucial aspect of this operation is the protection of the poor and vulnerable. Revitalizing the social protection system aims to assist those affected by the enduring economic crisis and the resulting price adjustments from macro-fiscal reforms. Additionally, promoting women’s empowerment and reducing gender discrimination are prioritized to encourage sustainable growth in Sri Lanka.
David Sislen, World Bank Regional Country Director for Maldives, Nepal, and Sri Lanka, expressed pride in the collaboration with local authorities, emphasizing their commitment to addressing Sri Lanka’s economic needs. “This operation represents support for critical reforms over the past two years, which were central to economic stabilisation,” Sislen stated.
The first operation in the RESET DPO series, which provides budget support to the Government of Sri Lanka, was approved by the World Bank’s Board of Directors on June 28, 2023. It focused on foundational reforms to restore macroeconomic stability, mitigate impacts on vulnerable populations, and support an inclusive, private sector-led recovery.
Funding from the DPO is contingent on the completion of specific prior actions or milestones, with disbursement based on the Government’s satisfactory progress in executing its broader macroeconomic and reform agenda.