The World Bank and the Government of Sri Lanka have officially signed the Second Resilience, Stability, and Economic Turnaround (RESET) Development Policy Operation (DPO) for $200 million. This marks the second phase of a two-part series initiated in 2022, following the first operation of $500 million disbursed in June and December 2023.
The goal of the Second RESET DPO is to support reforms aimed at improving economic governance, enhancing growth and competitiveness, and protecting the poorest and most vulnerable populations, ultimately fostering a more resilient and equitable economy in Sri Lanka.
This operation emphasises enhancing economic governance to establish a stable macroeconomic environment and restore investor confidence through significant reforms. Key initiatives include the introduction of a new Public Debt Management Act to inform borrowing decisions better, tax administration reforms to increase revenue, and measures to mitigate financial sector risks by tightening single borrower limits and improving non-performing loan resolution mechanisms. Additionally, to raise living standards and stimulate private sector development, the operation proposes amendments to the Telecommunications Act and a new Electricity Act aimed at improving services in these sectors, along with measures to enhance export competitiveness by reducing para-tariffs and customs duties.
A central focus of the operation is the protection of the poor and vulnerable segments of society. This will be accomplished by revitalising the social protection system to help these groups cope with the ongoing impacts of the economic crisis and price adjustments stemming from macro-fiscal reforms. Promoting women’s empowerment and reducing gender discrimination are also critical aspects aimed at fostering sustainable growth in Sri Lanka.
“We are very proud of the excellent collaboration with the authorities and their steadfast dedication to addressing the needs of the Sri Lankan economy. This operation represents support for critical reforms over the past two years, which were central to economic stabilisation,” said David Sislen, World Bank Regional Country Director for Maldives, Nepal, and Sri Lanka. “Moving forward, Sri Lanka will now have the opportunity to focus on maintaining its hard-earned stability and investing in the private sector to transform the national growth trajectory. Doing so is vital to boosting economic growth, creating jobs, and ensuring that everyone benefits from a stronger, more resilient economy.”
