World Bank grants US $150mn to strengthen Sri Lanka financial sector
By: Staff Writer
Colombo (LNW): The World Bank is set to grant US $150 million to strengthen Sri Lanka’s financial and institutional sectors, the Central Bank announced.
“Sri Lanka’s economic crisis highlights the need for strong safety nets to support the financial sector. Stable and reliable banking sector is essential for the economy, businesses and individuals, small businesses and poor households,” Faris Hadad-Zervos, World Bank Country Director for Maldives was quoted as saying in the Bank’s statement.
The World Bank Executive Board approved the $150 million assistance recently.“Strengthening the Deposit Insurance Scheme will help protect the savings of smaller depositors, including women and people living in rural areas.
It will also sustain the confidence in Sri Lanka’s financial system, a critical part of building the country back better,” he said.
The Cabinet of Ministers has green-lighted a proposal seeking to enter into necessary agreements with the World Bank to secure financing under the Sri Lanka Financial Sector Safety Net Strengthening Project.
The proposal was tabled by President Ranil Wickremesinghe, in his capacity as the Minister of Finance, Economic Stabilization and National Policies, at the Cabinet meeting held on Tuesday (Dec.05).
The project was designed to boost the financial and institutional capacity of the Sri Lanka Deposit Insurance Scheme (SLDIS), which is managed by the Central Bank of Sri Lanka.
The financing will help boost reserves of SLDIS which could be used towards the payout to insured depositors of banks and licensed finance companies.
In parallel, the project will support institutional strengthening of the SLDIS in line with international good practices for effective deposit insurance schemes.
On April 24, 2023, the Cabinet of Ministers gave the nod to implement the financial sector safety net strengthening project under World Bank funds.
Later, on November 09, the World Bank’s Board of Executive Directors approved USD 150 million in financing for Sri Lanka to strengthen the resilience of its financial sector.
The SLDIS was established in 2010 and has conducted several payouts for failed licensed finance companies in recent years. At present, the SLDIS guarantees the deposits of households and enterprises up to LKR 1,100,000, which covers more than 90% of deposit accounts in Sri Lanka.
The legal framework for deposit insurance in Sri Lanka was upgraded earlier this year through the approval of Banking Special Provisions Act by Parliament.
The World Bank earlier said SLDIS should now be strengthened institutionally and financially for the deposit insurance scheme to be able to effectively fulfill its legal mandate of protecting the financial sector stability.