Sri Lanka scrambles for funding after USAID freeze
The Sri Lankan government is looking at alternative financing for a minimum of a dozen government projects hitherto supported by USAID. The initiative comes in light of the recent US government move to freeze foreign assistance, significantly impacting the nation’s development programmes a high official of the Finance Ministry said.
At the time of the freeze, USAID funds were actively supporting five projects of the Ministries of Justice and Finance (one each) and the Ministry of Environment (two projects)
Approximately 1.34 per cent of the government budget for over 10 major programmes was financed by USAID. The projects cover sectors such as agriculture, climate change adaptation, disaster preparedness, youth entrepreneurship and border security, ministry data shows.
It has assisted government programmes with a value of US$233.4 million since 2019 up to now, data shows. The Treasury is now grappling to find alternate funding sources to continue these projects.
Of these, $20.4 million was disbursed in 2019, $41.9 million in 2021, $26 million during the crisis period of 2022 and $18.1 million plus $24.5 million to strengthen Sri Lanka’s market-driven growth and promote good governance practice during 2024 period up to now among four ministries.
The PARTNER project of the ministry is aimed to enhance Sri Lanka’s trade regulations, involving Deloitte Consulting in initiatives like a trade portal and biotech park.
The $22.9 million initiative which included collaboration with key government agencies was halted. Another $15 million USAID project, “Efficient and Effective Justice” has been suspended at the moment.
The $19 million Sri Lanka Energy Project supported CEB, LECO, and SLSEA in renewable energy. USAID also granted $46 million in 2023 to overcome fertiliser crisis.
The ministry is in negotiations with other foreign donors and financial institutions to fill the gap left by the USAID freeze. This includes negotiating with countries and organisations that have a history of supporting Sri Lanka’s development initiatives including the World Bank and the Asian Development Bank.
The Treasury is considering the possibility of re-deploying local financial resources towards prioritising and sustaining vital projects affected by the funding freeze. This would be achieved by reallocation of budget and re-prioritisation of existing and future expenses.
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