Sri Lanka in line for $100m. food-crisis loan

Sri Lanka is in line for an almost interest-free loan of up to US$100 million, following an appeal to a World Bank-led emergency fund set up to tackle the global food crisis. News of the possible loan was announced by World Bank regional vice-president, South Asia, Praful Patel, when he met a small group of journalists at a press briefing in Colombo on Friday. “Sri Lanka has made a request,” he said. “It is difficult to say how much [will be given], but we are not talking about 10 million or 15 million dollars. It will be around 100 million – in that range.”

The senior WB official, who said the global food crisis had been precipitated by rising fuel prices, noted that the World Bank was the first organisation to step in to take corrective action, resulting in the creation of the Food Crisis Response Fund.

“We contributed US$50 million to the fund, which will go to the most seriously affected countries,” Mr Patel said. “The fund is targeting some US$800 million for countries, such as Sri Lanka, that have been hit by the food crisis.” The loans come through the IDA (International Development Association), the World Bank organisation that works with the world’s poorest countries.

Mr Patel, whose visit comes just before closing his five-year term as WB vice-president, South Asia, and his retirement from the World Bank in August, praised the efforts of the government and “the people” to reduce poverty and sustain economic growth in the midst of a conflict. He quoted surveys to show that poverty in Sri Lanka, mainly outside the Western Province, had fallen by 7 percent to 15.2 percent of the population in 2006-2007, from 22 percent about five years ago.

He said the food crisis was triggered by many factors, and that the World Bank and other organisations were still trying to identify the primary causes. Some of the causes were rising fuel prices, cyclones and floods, and the diversion of food for the production of ethanol.

“One silver lining in this food crisis is that a lot of things that were on the back-burner to improve agriculture production have now come to the front,” Mr. Patel said. “Everyone in the world, including the World Bank, is now talking about how to revive the agriculture sector.”

But the bank official warned against complacency.“It does not mean that Sri Lanka is out of trouble [vis-à-vis the food crisis],” he said. “It means you can look at fixing some of the problems you had in the past, and ensure there is enough food for people. The solution for Sri Lanka is not to import more food. You are luckier, in a sense, than others, as there is no need to import any rice.”

Mr Patel was due to meet President Mahinda Rajapaksa later on Friday. The World Bank’s board of directors will meet on June 5 to discuss and approve a new four-year Country Assistance Strategy (CAS), worth US$900 million, for Sri Lanka.