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Moving Towards a Middle Income Country in Lasting Peace

January 4, 2011


  • "Sri Lanka has won the war, now it must win the peace."
  • The key challenge for Sri Lanka’s transition to a Middle-Income Country is to develop inclusive policies that benefit all segments of society in the growth process.
  • In order to help facilitate this process, Dr. Ngozi Okonjo-Iweala announced the country’s eligibility for IBRD financing, the institution’s commercial lending arm for middle income countries.

The World Bank Group's Managing Director’s recent visit highlighted the importance of inclusive development, one that promotes the inclusion of all segments of society in the growth process. In addition, the World Bank would like to work with the government in order to improve governance and accountability as well as facilitating South-South dialogue to enhance mutual learning.

The Government’s Development Vision, the Mahinda Chintana seeks to transform Sri Lanka into an emerging “Wonder of Asia” and is dedicated to seeing per capita income rise well above $4,000 over the next six years. It also focuses on developing infrastructure, education, and health services.

In order to help facilitate this process, Dr. Ngozi Okonjo-Iweala announced the country’s eligibility for IBRD financing, the institution’s commercial lending arm for middle income countries, during her speech given at the 60th anniversary of the establishment of the Central Bank on December 17th, 2010. This better reflects the country’s new development ambitions and provides an option to more than double the amount of resources available to Sri Lanka every year to realize the country’s ambitious development goals.

The typical repayment terms of IBRD support is 15 to 20 years with a three-to-five-year grace period at near market rates. IDA credits have 20, 35, or 40-year repayment periods with a 10-year grace period on the repayment of principal. IDA credits do not carry interest charges, but do have a .75 percent service charge on disbursed funds.

" "The expansion of the knowledge economy and the search for innovative ideas by all Sri Lankans will be important to successfully accelerate growth and improve living standards." "

Ngozi Okonjo-Iweala

Former Managing Director of the World Bank Group

According to Dr. Okonjo-Iweala, Sri Lanka has what it takes to be the Wonder of Asia if it can tackle the issues of inclusive growth acceleration. "To get there, raising investments, improving productivity of those investments through innovation policies, skills development and macroeconomic stability will be important,” she said. “Above all, implementing policies that promote the inclusion of all segments of society in the growth process will be crucial. Sri Lanka has won the war, now it must win the peace.”

The World Bank was one of the first institutions to step in and assist in the North and East in the post-conflict reconstruction and rehabilitation. Its projects have assisted with areas as broad as tourism, agriculture, infrastructure, livelihoods, health, and education.

While the situation in the North is improving with less than 23,000 people in IDP camps down from 300,000 in late 2009, the challenges that they face in rebuilding their lives remain challenging. The World Bank has been actively supporting reconciliation through various projects aimed at improving income generation and infrastructure needs in conflict-affected areas of the North and East.

Dr. Okonjo-Iweala visited four projects aimed at promoting inclusive development. At the Nenasala (Telecenter) in Kallady, she spoke with beneficiaries of the E-Sri Lanka Project, which has digitally connected hundreds of villages with access to useful information and the IFC SME Toolkit Project that builds capacity for small businesses.

She also visited the Reawakening Project in Thiraimadu, which provides income generation opportunities for vulnerable people, including victims of the conflict to restore normalcy to their lives and encourage social and economic integration. The 200,000 families that have benefited so far from the program have seen their incomes increase by up to 50 percent.

At the Eastern University, Dr. Okonjo-Iweala met with students supported by the Higher Education Project, which emphasizes employability skills such as computer literacy and English language. It has benefited over 100,000 students and 5,000 staff throughout Sri Lanka and is being scaled up. These projects are among many that are promoting inclusive growth throughout Sri Lanka.

During her visit, Dr. Okonjo-Iweala spoke with many beneficiaries of the projects, who told her about the assistance they’ve received from these projects and how it has changed their lives.

Raheem, a 51 year old fisherman has used the Fishing Lanka application at his local Nenasala through the E-Sri Lanka Project for four months and has seen his costs decrease and income rise. He now has more time to spend with his wife and children. “I used to spend 3-4 hours to catch 50 kilos of fish, spending Rs. 2000 rupees on fuel, I now only spend half an hour to catch 70-75 kilos, saving Rs. 1000 on fuel.”

26-year old Dinesh has owned a shop called Energy Communications for three years offering phone cards, photocopying, fax, and laminating services. He took a seminar and started using the SME Toolkit program in the Tamil language and learned how to effectively maintain his accounts. “I now have a computer in my shop and am connected to broadband. My shop used to make Rs. 20,000 a month and now makes up to Rs. 35,000 per month. With the money I have made, I will renovate my shop and have identified two new places to expand.”

Reawakening Project Beneficiaries

Murukathasan Sivashakthi is a 31 year old ex-combatant who was in the LTTE for 7 years and has recently returned home after living in a rehabilitation camp. Having a daughter to care for, she and two other women created a group to work together on livestock rearing. With Rs. 20,000 in support, the women have been able raise goats and start a poultry farm. “We are now able to earn between Rs. 5,000-7,000 per month and feel like we have a future. My dream is to be able to educate my daughter,” she said.

Forty year old Siriyalatha Weerakoon is a widow and had many difficulties earning enough as an agricultural laborer to support her two children and life was very harsh. Under the Reawakening Project, she was able to obtain Rs. 20,000 in support from the program to cultivate Black Gram and earned Rs. 50,000 after a success harvest. “From this income, I was able to repair my house and spend money on improving my children’s education. I have now become the president of the Microfinance committee and work hard to help others,” she said.

Mislin Nona is a 46 year old widow who lives with her disabled son. Previously involved in certain illicit activities, she was regularly sentenced in court and income was earned irregularly. She was provided with Rs. 25,000 in support to purchase a water pump to begin vegetable gardening. “With the income I made, I finished my house, bought a wheelchair for my son. I now earn Rs. 15,000 a month and it has transformed my life.”

Ganjana Chandamali purchased a Sig Z sewing machine with project support and has been able to almost double her income. “I now stitch school and preschool uniform on a large scale and am able to support my family and save for the future.”

Higher Education Project Beneficiaries

Former Eastern University Agricultural Sciences student and current assistant lecturer, 27 year old Ragupriya discussed the support she received from the Higher Education Project to purchase proper laboratory equipment to improve the quality of their research on rice and pulses. “With the new equipment, I was able to develop my research and have my work published. This gave me an opportunity to attend the Rice Congress conference in Viet Nam this year to present my findings and allowed me to share and gain global knowledge,” she said.