The Asian Development Bank has doubled its financing for Sri Lanka’s trade and investment reform programme to $200 million, adding a $100 million buffer intended to help the economy absorb pressure from the conflict in the Middle East.
The Sri Lankan loan forms part of a wider $450 million package the ADB is deploying across Sri Lanka and Cambodia, aimed at shielding both economies as the conflict drives up costs and deepens uncertainty across Asia and the Pacific.
“No family should be pushed deeper into poverty by a conflict thousands of kilometers away,” ADB President Masato Kanda said. “We are moving quickly to protect more than 1 million struggling households in Cambodia while helping Sri Lanka create jobs, attract investment, and expand trade. These investments will help both countries withstand today’s pressures and emerge stronger from the next shock.”
Sri Lanka’s share is a policy-based loan channelled through the ADB’s Trade, Investment and Industry Development Programme. The programme supports reforms to modernise trade systems, improve the competitiveness of small and medium-sized enterprises, and attract investment into the country’s economic zones.
The reforms are expected to help Sri Lankan businesses expand, enter export markets and integrate into regional and global value chains, the bank said, while supporting job creation and private sector-led growth. The programme also seeks to diversify the export base and reduce the country’s exposure to future global shocks — a priority for an economy still rebuilding its external buffers.
The additional financing underlines the risks facing Sri Lanka’s recovery. Instability in the Middle East threatens to raise import costs and disrupt key foreign exchange inflows, both sensitive points for an economy dependent on imported fuel and on remittances from workers in the Gulf.
The remaining $250 million of the package goes to Cambodia’s Rapid Intervention for Stabilization of the Economy programme, which will fund temporary fiscal measures and protect planned social spending in the 2026 national budget. More than a million poor households there are to receive income support, including at least 350,000 headed by women.
Cambodia’s programme may draw further support from the Asian Infrastructure Investment Bank and the Japan International Cooperation Agency, which could lift combined financing for that component to $688 million.
Update (August 4): Cabinet clears the borrowing
The Cabinet of Ministers has approved obtaining the $200 million policy-based loan, completing the Sri Lankan side of the transaction four days after the ADB signed it off.
Cabinet spokesman Minister Dr. Nalinda Jayatissa said loan negotiations covering Subprogram 1 of the ADB’s Trade, Investment and Industry Development Programme had been concluded successfully, EconomyNext reported. The loan is drawn from the bank’s Ordinary Capital Resources.
Legal clearances for the borrowing have been obtained from the Attorney General’s Department and the Central Bank of Sri Lanka.
Hiru News reported that Cabinet approved the proposal — submitted by President Anura Kumara Dissanayake in his capacity as Minister of Finance, Planning and Economic Development — subject to the terms and conditions put forward by the Public Debt Management Office.
The decision follows the authorisation Cabinet granted on June 15 to enter formal negotiations with the Manila-based lender. That step had itself added $100 million to a $100 million tranche already earmarked for the programme under the $380 million policy-based lending envelope approved for 2026 in March, taking the Sri Lankan facility to its present $200 million.
