Sri Lanka to seek eligibility for IDA loans while remaining as a middle-income country: PMD

The government stated that Sri Lanka will remain a middle-income country and pursue a “reverse graduation” policy for a limited period of time.

Releasing a press release, the President's Media Division said that the Cabinet-approved proposal will only be intended to request the World Bank to grant the country eligibility to obtain loans offered by the International Development Association (IDA).

History has shown that pushing countries into market-based borrowing before their economies are sufficiently robust to absorb the associated higher debt servicing costs is counter-productive and likely to lead only to situations where countries have to reverse graduate into IDA.

Full Statement

The government stated that Sri Lanka will remain a middle-income country.

Sri Lanka no longer qualifies for International Bank for Reconstruction and Development (IBRD) loans due to a downgrade of the country’s credit rating.
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Therefore, the Cabinet approved a proposal yesterday (10) to request the World Bank to grant the country eligibility to obtain loans offered by the International Development Association (IDA).

This is with the aim of obtaining concessionary funding from the International Development Association (IDA) — an arm of the World Bank that helps the world’s vulnerable countries. This facility is called “Gap”.

Twelve countries including Indonesia have availed themselves of this facility when they were facing economic downturn similar to Sri Lanka. The Government is pursuing a “reverse graduation” policy for a limited period of time.