ADB says ready to give more financial support to Sri Lanka

MANILA TOKYO The Asian Development Bank ADB is ready to give more financial support to Sri Lanka, a top official of the regional lender, said on Tuesday as the Indian Ocean nation battles its worst economic crisis in more than seven decades.

After an ADB pact this month for an emergency loan of $200 million to ensure access to food and protect livelihoods was sparked by protests that forced out the president.

As a key long-term partner, the ADB is ready to provide further support, according to Masatsugu Asakawa, the bank's president.

Sri Lanka's economy has contracted and it is suffering from very high inflation which is adversely affecting living standards, Asakawa said. The annual figure exceeded 70 per cent in August.

He said that we are working closely with the government in support of the country in this challenging time.

Asakawa said that Colombo was working to finalise a staff-level agreement with the International Monetary Fund IMF for a loan of $2.9 billion, by seeking financing assurances from creditors.

After the IMF program is completed, we will consider joining another, by providing additional financial resources to join other rescue packages for Sri Lanka, said Asakawa, a former Japanese vice finance minister for international affairs.

Asakawa pointed out the risks of abrupt capital outflows from Asia and the possibility of very sharp currency depreciation for some time, as the U.S. central bank tightens monetary policy aggressively.

Asia has become more resilient against financial turmoil, with an improved current account balance and sufficient accumulation of foreign reserves than during the Asian financial crisis of the late 1990s, he added.

Asakawa said that the portfolio capital movement is very volatile and very fast.

He added that it's always a good thing to be vigilant in the broader capital movement.

He said that he's trying to improve regional co-operation efforts, including that of ASEAN 3, as well as a grouping of China, Japan and South Korea with southeast Asian nations.