The Cabinet has approved an agreement with the Asian Development Bank for US$100 million in policy-based financing to implement the second sub-programme of Sri Lanka’s Water Supply and Sanitation Reform Programme, Cabinet Spokesman Nalinda Jayatissa said, EconomyNext reported.
The money splits evenly: US$50 million from the ADB’s regular capital resources and US$50 million on concessional terms, the Daily Mirror reported. The two outlets describe the first half slightly differently — the Daily Mirror as regular general capital resources, EconomyNext simply as a policy-based loan — but agree the second half is concessional.
The tranche sits inside a US$620 million ADB policy-based loan facility approved by the bank’s Board of Directors to support Sri Lanka’s reform agenda in line with the International Monetary Fund’s Extended Fund Facility programme. The proposal was submitted by President Anura Kumara Dissanayake as Minister of Finance, Planning and Economic Development.
What the money is for
Both filings give the same list of weaknesses the programme targets:
- water resource management
- operational and financial inefficiencies
- exposure to climate risks
- gaps in social inclusion
- inadequate coordination among stakeholders
Every item is institutional. None is a pipe, a plant or a treatment works — which is the distinction that matters here.
This is not the water project Cabinet approved in May
Two ADB water approvals five months apart are easily read as the same money. They are different instruments.
In May, Cabinet cleared procurement under the Climate-Resilient Sustainable Water Supply and Sanitation Project, a US$250 million scheme with US$200 million from the ADB’s ordinary capital resources, covering five named sub-projects: the Ambatale treatment system, the Jubilee water supply system, non-revenue water management at Kolonnawa, the Lunugamvehera integrated scheme and the Jaffna wastewater project. That is project lending — it buys infrastructure at identified sites.
Tuesday’s approval is policy-based lending, disbursed against reforms rather than works. It funds the government’s budget on condition that the sector’s rules and institutions change. The May package builds; this one is meant to make what gets built financially sustainable.
The fourth ADB policy tranche this year
The US$620 million facility is the frame for a sequence this desk has recorded through 2026. Cabinet approved a US$380 million policy-based loan envelope for 2026 in March, of which US$100 million went to the Trade, Investment and Industries Development Programme. It took a supplementary US$100 million in June, citing the Middle East conflict and climate shocks, which followed the ADB’s US$4 billion crisis shield for 14 affected countries. A US$200 million trade and investment reform loan followed in July.
Policy-based lending of this kind is budget support. It is also the form of borrowing most closely tied to the IMF programme, which concludes in March 2027 and on whose successor the government is now in talks. The President told this week’s investment summit he was keeping the door open to a fresh IMF programme.
Not reported
Neither filing states what reforms trigger disbursement, when the money arrives, or what the first sub-programme of the Water Supply and Sanitation Reform Programme cost and achieved — a figure that would show whether US$100 million is a step up or a continuation. Neither gives the interest terms on either half, nor how much of the US$620 million facility remains uncommitted.
Sources: EconomyNext, Daily Mirror.
