ADB Approves $100 Million Loan To Strengthen Sri Lanka’s Power Sector, Accelerate CEB Unbundling And Renewable Energy Growth

The Asian Development Bank (ADB) has approved a $100 million policy-based loan to support Sri Lanka in strengthening its power sector. This financing builds on previous initiatives aimed at creating a more stable and financially sustainable electricity system in the country. The loan forms part of the second phase of ADB’s Power Sector Reforms and Financial Sustainability Program, which focuses on accelerating the unbundling of the Ceylon Electricity Board (CEB) into independent companies responsible for generation, transmission, system operation, and distribution. This restructuring follows the Electricity Act of 2024 and its 2025 amendment. The phased approach ensures a smooth and structured transition, allowing the reform process to progress systematically while maintaining financial stability as a key priority.

ADB Country Director for Sri Lanka, Takafumi Kadono, noted that Sri Lanka has made significant progress in stabilizing its economy and strengthening its fiscal position. He emphasized that a well-functioning power sector is essential for the country’s continued recovery and sustainable growth. The program aims to improve governance in the power sector, foster private sector participation, and accelerate the development of renewable energy, contributing to long-term resilience and inclusive growth.

To enhance financial sustainability, the program will support the implementation of cost-reflective tariffs and a comprehensive debt restructuring plan for the CEB. The new independent companies will receive guidance on the transparent allocation of existing debts, which will strengthen their financial viability, improve creditworthiness, and enable them to operate on a more sustainable footing.

The program also focuses on promoting renewable energy development and private sector engagement. By enhancing transparency and supporting financially sustainable power sector entities, it will enable competitive procurement for large-scale renewable energy projects and other identified priority generation schemes. These initiatives will be carried out while upholding strong environmental standards.

Promoting gender equality and social inclusion is an integral part of the program. Energy sector agencies have implemented annual women’s leadership programs, adopted inclusive policies, and launched feedback mechanisms to ensure equitable participation of female consumers and entrepreneurs. The program also provides targeted support for vulnerable groups, including maintaining lifeline tariffs and implementing measures to reduce the impact of tariff adjustments and sector reforms. In addition, ADB will provide a $2.5 million technical assistance grant from its Technical Assistance Special Fund to support program implementation.

This grant will help build the capacity of the new successor companies, assist in the development of their business plans, and support the preparation of comprehensive power system development plans. Established in 1966, the Asian Development Bank is a leading multilateral development bank that supports inclusive, resilient, and sustainable growth across Asia and the Pacific. Working with its members and partners, ADB addresses complex development challenges using innovative financial tools and strategic partnerships, aiming to transform lives, develop quality infrastructure, and protect the environment. It is owned by 69 members, including 50 from the region.