ADB approves support for power sector reforms in Sri Lanka

The Asian Development Bank (ADB) today approved a $100 million policy-based loan to support and facilitate reforms aimed at improving the financial sustainability of Sri Lanka’s power sector.

The Electricity Sector Reform and Financial Sustainability Program will complement the International Monetary Fund’s Extended Facility arrangement and will strengthen the operational efficiency and competitiveness of the country’s electricity sector. The program will help create an enabling environment for private investments, boosting the development of renewable energy and modernizing electricity grids.

“The development of cost-competitive renewable energy and the provision of reliable and affordable electricity – with a transparent and independent power sector regulatory framework – will help Sri Lanka boost economic growth and address the current financial and economic crisis,” said Jaimes Kolantharaj, Senior Energy Specialist at ADB.

“This programme will support the power sector reforms introduced under the Electricity Act, including institutional and regulatory reforms, and enhance the operational sustainability of the power sector. The programme will also support the development of renewable energy to accelerate the country’s transition to clean energy, as envisaged in Sri Lanka’s Nationally Determined Contributions.”

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The programme will assist the Government in undertaking institutional reforms in the electricity sector by creating independent companies with defined functions and will support the strengthening of their corporate governance and financial sustainability. It will support regulatory reforms with the implementation of the new national tariff policy that will improve the financial sustainability of the sector through cost-reflective tariffs.

To help accelerate investments in renewable energy, the programme will support multiple initiatives under the renewable energy expansion plans for 2023-2030. Key initiatives include implementing a periodic review of feed-in tariffs for small power plants and rooftop solar users, facilitating the integration of renewable energy projects into the national grid, and the effective implementation of a competitive procurement framework for renewable energy projects. The programme will support increased participation of women in the electricity sector by developing policies that promote equitable participation of female customers, women entrepreneurs, and disadvantaged women and community groups.

The program will help create an enabling environment for private investment, boosting the development of renewable energy and modernizing electricity grids.

ADB will provide an additional $1 million technical assistance grant from its Special Technical Assistance Fund to support programme implementation, capacity building of power companies, development of their business plans and overall power system development plans.

The ADB is committed to achieving a prosperous, inclusive, resilient and sustainable Asia and the Pacific region, while continuing its efforts to eradicate extreme poverty. Established in 1966, it has 68 members—49 in the region.