Colombo: A sum of USD 700 million is approved by the World Bank for financing help to Sri Lanka recover from the current economic crisis and provide relief to the poor and vulnerable people, the biggest funding tranche since the IMF deal in March. Cash-strapped Sri Lanka is currently struggling with the worst economic crisis in history.

In 2022, the economy had contracted by over seven per cent as the economic difficulties forced people to take to the streets with protests across the island nations that also led to the ouster of Sri Lanka's powerful Rajapaksa family from politics.

The World Bank Board of Directors Wednesday approved USD 700 million in financing to help Sri Lanka to recover from the current economic crisis and provide relief to the poor and vulnerable people, the Washington-based bank said in a press release.

Of this amount, USD 500 million have been assigned for budgetary support and USD 200 million for social security.

This is the biggest financial relief to Sri Lanka since the International Monetary Fund (IMF) reached an agreement with Sri Lanka last March to provide an Extended Fund Facility of USD 2.9 billion.

In March, the IMF approved a USD 3 billion bailout programme to help Sri Lanka overcome its economic crisis and catalyse financial support from other development partners, a move welcomed by Colombo as a "historic milestone" in the critical period.

Sri Lanka has been hit hard by a catastrophic economic and humanitarian crisis, sparked by years of mismanagement and the raging pandemic.

The World Bank said its Board of Directors approved USD 700 million in financing for two operations to help Sri Lanka implement foundational reforms that restore macroeconomic stability and sustainability, mitigate the impact of current and future shocks on the poor and vulnerable, and support an inclusive and private-sector-led recovery and growth path.

The Sri Lanka Resilience, Stability and Economic Turnaround (RESET) Development Policy Operation (USD 500 million) will support reforms that help improve economic governance, enhance growth and competitiveness, and protect the poor and vulnerable. It will provide budget support in two equal tranches against agreed prior actions, it said.

The World Bank Wednesday announced that its Board of Directors discussed the new Country Partnership Framework (CPF) for Sri Lanka, which aims to help restore economic and financial sector stability and build a strong foundation for a green, resilient, and inclusive recovery.

This CPF comes at a time when the country is navigating a severe economic crisis that is having devastating impacts on people's lives and livelihoods and which demands deep reforms to stabilize the economy and protect the poor and vulnerable.

Sri Lanka's poverty rate is estimated to have doubled from 13.1 to 25 per cent between 2021 and 2022an addition of 2.5 million poor peopleand is projected to increase by another 2.4 percentage points in 2023.

The extent of the crisis in Sri Lanka is unprecedented, but offers a historic opportunity for deep reforms to reset the country's economic storyline, said Faris H. Hadad-Zervos, World Bank Country Director for Sri Lanka.

The CPF supports this shift. Through a phased approach, the World Bank Group's strategy focuses on early economic stabilization, structural reforms, and protection of the poor and vulnerable. If sustained, these reforms can put the country back on the path towards a green, resilient and inclusive development.

A strong and engaged private sector is crucial for Sri Lanka, especially in overcoming the economic crisis. Sri Lankans urgently need jobs and livelihood opportunities to rebuild lives affected by the crisis, said Shalabh Tandon, Acting Regional Director for IFC South Asia.