Sri Lanka Cabinet approves $200mn ADB loan for MSMEs

ECONOMYNEXT — Sri Lanka’s cabinet has approved entering into an agreement with the Asian Development Bank (ADB) to obtain a 200 million US dollar loan to support micro, small, and medium-sized enterprises (MSMEs).

The facility will finance ‘Sub-program 1’ of the Sector Development Program, which focuses on building a robust and inclusive financial ecosystem for MSMEs.

The Department of External Resources has concluded formal loan negotiations with the ADB to acquire the funds.

The 200 million dollar loan will be drawn from the ADB’s ordinary capital resources and is divided into two equal tranches of 100 million US dollars each.

One tranche will serve as policy-based lending, while the other provides financial intermediation lending.

The financing falls under a broader framework approved on March 16, 2026, to conduct negotiations for up to 620 million US dollars across five sub-programs to support Sri Lanka’s reform agenda aligned with the International Monetary Fund’s (IMF) Extended Fund Facility.

Responding to questions from journalists on why Sri Lanka is securing 200 million dollars after seeking approval for 620 million dollars, cabinet spokesperson Nalinda Jayatissa clarified:

“Approval has been granted for the entire 620 [million]. Accordingly, depending on how negotiations progress and based on the case we present, the loan is disbursed,” Jayatissa said.

Jayatissa noted that discussions were held to secure the 200 million dollar loan under two distinct repayment frameworks.

The 100 million dollar policy-based component carries a 12-year repayment period with a three-year grace period.

The remaining 100 million dollar financial intermediation component has a 15-year repayment period alongside a five-year grace period. (Colombo/Nov10/2026)