Cabinet nod to seek $ 200 m World Bank loan for social security program 

• Move comes amidst World Bank warning SL of worsening of poverty

The Cabinet of Ministers at its meeting on Monday approved holding discussions with the World Bank for a $ 200 million loan for the social security net program in Sri Lanka.

The proposed project will be implemented under the three components.

“These include providing financial assistance to identified families, conducting a pilot program to increase opportunities for the poor and vulnerable and strengthening the social security system,” Cabinet Co-Spokesman and Minister Bandula Gunawardena said at the post-Cabinet meeting media briefing yesterday. The proposal to this effect submitted by President Ranil Wickremesinghe in his capacity as the Finance, Economics Stabilisation and National Policies Minister was approved by the Cabinet of Ministers at its meeting on Monday.

The move comes after the World Bank warned Sri Lanka of possible worsening of poverty if the country fails to address the needs of vulnerable groups when it implements painful adjustments in line with reforms for the four-year extended fund facility of $ 2.9 billion from the International Monetary Fund (IMF).

According to the World Bank report, poverty is projected to remain above 25% in the next few years due to the multiple risks to households’ livelihoods.

The multilateral lending agency also said rising inequality is also a concern, while poverty in urban areas has tripled and in rural areas doubled.

“Nearly 13 people out of 100 have been under the poverty line in 2020, increasing from 12 in the previous year. The number rose to 13 in 2021 and almost doubled to 25 last year,” the World Bank report noted.

As per Central Bank data, the updated national poverty line for Sri Lanka has surged to Rs. 13,777 in 2022, registering an annual increase of 74%.

It said the increase has added 2.5 million people into poverty in 2022.

“Many households were impacted from different fronts as prices rose by 46% last year, jobs in services and industry contracted, and pushing workers to lower-paying agricultural jobs. The decline in remittances also hit the income level.

The rise in food insecurity has also led to increases in malnutrition and stunting up from 7.4% in 2021 to 9.4% in 2022, the report said.

The report also noted that households experiencing food insecurity are reducing their spending on health and education, a move that could result in poor human resources in the future.