FOREIGN AID REVIEW-2001
EXTERNAL RESOURCES DEPARTMENT
MINISTRY OF POLICY DEVELOPMENT AND IMPLEMENTATION
COLOMBO, SRI LANKA
PREFACE
The Department of External Resources is pleased to present the Annual Report on Foreign Aid Review 2001, and particularly to note that Sri Lanka was able to mobilize an amount of US$ 754 Mn in the year 2001.
The report reviews the foreign aid profile, aid commitments made by major donors, disbursements including disbursements made outside the Country Programme, aid utilization, highlights of selected completed projects and statistical tables relating to the foreign aid received in 2001. Detailed information on debt service payment, debt service forecasting, net flows and net transfers of foreign aid has also been provided.
It is hoped that the report would be useful to stakeholders, researchers and implementing agencies for understanding and analysing the status of external assistance received by Sri Lanka.
Your comments and feedback would be most welcome
Table of Contents
Preface Page No.
Table of contents…………………………………………………………………i
Text Tables and Charts………………………………………………………….iii
1. Foreign Aid Profile ………………………………………..…………………1
1.1Loan and Grant Commitments …………………………………..….1
1.2Loan and Grant Disbursements ………………………..……………3
1.3Foreign Aid utilization ………………………..…………………….5
1.4Foreign Aid Commitments and Disbursements by Sector…………..6
2.Aid Commitments and Disbursements by Donor ………………………….8
2.1 Bilateral donors ……………………………………………………8
2.1.1.Japan……………………………………………………………….8
2.1.2 Federal Republic of Germany ……………………………………..9
2.1.3 India ………………………………………………..……………....9
2.1.4 Korea ……………………………………………..………………..9
2.1.5 United States of America (USA)……………………………….…10
2.1.6 China …………………………………………..………………….10
2.1.7 Kuwait …………………………………………………………….11
2.1.8 Sweden ……………………………………………………………11
2.1.9 Norway ……………………………………………………………12
2.1.10 The Netherlands ………………………………………………….12
2.1.11 Australia ………………………………………………………….12
2.1.12 Canada ……………………………………………………………12
2.1.13 France ………………….…………………………………………12
2.1.14 United Kingdom ……………………………….…………………12
2.2Multilateral Donor Agencies ………………………………………13
2.2.1The Asian Development Bank (ADB)………………………….….13
2.2.2 International Development Association (IDA)…………………….14
2.2.3 Unicef ……………………………………..…………………….14
2.2.4 World Food Programme (WFP)……………………………………14
2.2.5 Food & Agriculture Organization (FAO)………………….………15
2.2.6 United Nations Development Programme (UNDP)……………….15
2.2.7 United Nations Population Fund (UNFPA)………………………..15
2.2.8 European Community (EC)………………………………………..15
2.2.9 International Fund for Agricultural Development (IFAD)………...15
2.2.10 OPEC Fund for International Development …………………..…16
2.2.11 Nordic Development Fund (NDF)…………………..…………....16
2.2.12 Saudi Fund for Arab Economic Development (Saudi Fund)……..16
2.3 Export Credit …………………………………..…………………..16
3.Foreign Aid Disbursement – Outside the Country Programme ……….….17
3.1Norway ………………………………………………………………17
3.2 Sweden ………………………………………………………………17
3.3 The Netherlands ……………………………………………………..18
4.Debt Service Payments, Net flows and Net Transfers by Creditors …… ..20
4.1Debt Service Payments for Foreign Loans ………………………….20
4.2 Loan Repayments by Major Donors ………………………………...20
4.3 Debt Service Forecast on Existing Portfolio ………………………..23
4.4 Net Flow & Net Transfer on Foreign Debt …………………………24
5.Highlights of completed projects ……………………………………………26
5.1Colombo Environmental Improvement Project – IDA……………...26
5.2 Year 2000 Emergency Assistance Project – IDA …………………...27
5.3 Financial Management Training Project – ADB ……………………29
5.4 Impact Evaluation on Rural Credit Projects – ADB ………………. 30
5.5 Greater Colombo flood control & Environment Improvement
Project Phase II….…………………………………………………..31
5.6 Plantation Sector Reform Project – JBIC …………………………...33
5.7 Second Badulla Integrated Rural Development Project – IFAD…….34
5.8 Plantation Development Support Programme 1998-2005……….…..36
6. Appendices ……………………………………………………………………40
Test Tables and Charts
List of Tables Page No.
1.1Foreign Aid Commitments by type 1996 – 2001…………………... 01
1.1.2Bilateral and Multilateral Aid Commitments 1996 – 2001……….. 02
1.2Foreign Aid Disbursements 1996 – 2001…………………………. 04
1.3Disbursement Ratio for the period 1998-2001…………………….. 05
3.1Aid disbursements – Norrway..……………………………………. 17
3.2Aid disbursements- Sweden……………………………………….. 18
3.3Aid disbursements – The Netherlands……………………………… 19
4.1Foreign Loan Repayments 1997-2001… ………………………… 20
4.2Actual debt Service Payments 1997-2001 ……………………….. 21
4.2.1 Monthly distribution of debt service in 2001..……………………… 23
4.3Debt Service Forecast on existing portfolio 2002-2005 ………….. 24
4.4Net flow & Net transfer by creditor category 1997-2001…..…….. 25
List of Charts
1.1Aid Commitments by major donors – 2001 ………………………. 03
1.2Aid Disbursements by major donors…………………………….. 04
1.3Aid Commitments by Sector – 2001 ……………………………... 06
1.4Aid Disbursements by Sector – 2001……………………………… 07
1.5 Loan Repayment by major donors – 2001 ……………………….. 22
Appendices Page No.
1: Summary of Total Foreign Aid received-2001……………………………….40
2: Aid Commitments by Donor…………………………………………………41
3: Loan Commitments by Donor………………………………………………...42
4: Grant Commitments by Donor………………………………………………..43
5: Summary of Aid Disbursements by Donors –2001…………………………...44
6: Aid Disbursements by Donor…………………………………………………45
7: Loan Disbursements by donor………………………………………………...46
8: Grant Disbursements by Donor……………………………………………….47
9: Aid Commitments by Sector………………………………………………….48
10: Foreign Aid Agreements signed during the year 2001………………………49
11: Aid Disbursements by Sector………………………………………………..53
12: Aid Disbursements by Sector 2000-2001…………………………………..54
13: Aid Disbursements by Sector 1983-2001…………………………………...55
14: Aid Disbursements- Relationship between Donor and Sector………………56
15 Summary of Aid Disbursements by Type 1983-2001……………………….57
16: Aid Disbursements by Projects ……………………………………………...58
17. Aid Disbursements –Technical Assistance…………………………………..64
18: Debt Service Payments on Existing Portfolio………………………………66
19: Summary of Government Foreign Debt Stock and Flows………………….67
20: External Debt Servicing (Repayments)……………………………………..68
1
1. Foreign Aid Profile
1.1 Loan and Grant Commitments
The total amount of foreign aid commitments made to Sri Lanka by the bilateral and multi-lateral donors amounted to US$ 754 Mn[1] in 2001(see Appendix 1-4 ). Of this amount, 91 per cent was in the form of loans while the remaining nine per cent was in grants. Table 1.1 below shows the details of commitments of loans and grants from 1996 to 2001.
Table 1.1 Foreign Aid Commitments 1996 - 2001( in US $ Mn)
Type / 1996 / 1997 / 1998 / 1999 / 2000 / Average1996-2000 / 2001
Loans / 881 / 562 / 607 / 640 / 351 / 608 / 687
Grants / 134 / 138 / 128 / 71 / 96 / 113 / 67
Total
/ 1015 / 700 / 735 / 711 / 447 / 721 / 754Source: Information Systems & Debt Management Division, ERD 2001.
The following factors may be highlighted in the aid commitments made in 2001 when compared with the annual average flow of foreign aid for the period 1996-2000.
Total commitments increased by US $ 33 Mn or five per cent.
Total loan commitments increased by US $ 79 Mn or 13 per cent.
Total grant commitments decreased by US $ 46 Mn or 41 per cent.
The increase in the loan commitments in 2001 is mainly due to the mobilization of more funds through export credit. In addition, signing of agreements for a number of loans which were negotiated in 2000, especially with Japan and ADB, had taken place in 2001[2] due to various reasons. In contrast, the total grant commitments has declined
steadily in the period under review. The aid commitments by bilateral and multilateral donors during 1996-2001 are given in Table 1.1.2 .
Table 1.1. 2Bilateral and Multilateral Aid Commitments 1996 - 2001
(US $ Mn)
Source / 1996 / 1997 / 1998 / 1999 / 2000 / Average1996-2000 / 2001
Bilateral / 561 / 473 / 328 / 301 / 190 / 371 / 507
Multilateral
/ 350 / 165 / 296 / 357 / 142 / 262 / 170Total
/ 911 / 638 / 624 / 658 / 332 / 633 / 677Source: Information Systems & Debt Management Division, ERD 2001.
The following factors may be highlighted in the annual average aid commitments made by bilateral and multilateral donors in 2001 when compared with the period 1996-2000.
- Bilateral commitments increased by US $ 136 Mn or 37 per cent.
- Multilateral commitments decreased by US$ 92 Mn or 35 per cent.
- Bilateral and Multilateral commitments together increased by US$ 44 Mn or 07 per cent.
Compared to the previous year, there was a marked change in the composition of sources of funds. Of the donors, Japanand ADB recorded higher commitment levels. The details of aid commitments by major donors are shown in chart1.1.
Chart 1.1 Aid Commitments by Major Donors - 2001
Source: Information Systems & Debt Management Division, ERD 2001.
Japan, the largest donor, has recorded US$ 354 Mn or 47 per cent of the total commitment in the year 2001. The ADB has contributed 17 per cent of the total commitment although there has been a 20 per cent reduction in its commitment. India and Korea have become significant donors to Sri Lanka offering US$ 43.3 Mn and US$ 30.2 Mn respectively. The contribution by Germany has increased up to US$ 48.1 Mn in 2001 from US$ 30.3 Mn in 2000.
1.2 Loan and Grant Disbursements
The total amount disbursed under foreign loans and grants by all creditors and donors in 2001 was US $ 495 Mn (see Appendix 5). Of this, loans represent 85 per cent while the remaining 15 per cent are grants (see Appendix 5 -8). Table 1.2 shows the status of aid disbursement under grants and loans over the five years from 1996 to 2001.
Table 1.2. Foreign Aid Disbursements 1996 – 2001 (US $ Mn)
Type
/ 1996 / 1997 / 1998 / 1999 / 2000 / Average1996- 2000 / 2001
Loans / 456 / 412 / 579 / 348 / 442 / 447 / 426
Grants / 144 / 131 / 114 / 109 / 71 / 114 / 69
Total
/ 600 / 543 / 693 / 457 / 513 / 561 / 495Source: Information Systems & Debt Management Division, ERD 2001.
When compared with the annual average foreign aid disbursement for the period 1996-2000, the following aspects may be highlighted for the disbursements in 2001.
- Total disbursement declined by US $ 66 Mn or 12 per cent.
- Disbursement of loan funds declined by US $ 21 Mn or 05 per cent
- Disbursement of grant funds declined by US$ 45 Mn or 39 per cent.
Despite a 12 per cent decrease in overall disbursement in 2001, disbursement by some major donors viz. Japan, ADB and Germany increased by 12 per cent, 21 per cent and 45 per cent respectively in the same year.
Chart 1.2 Aid Disbursement by Major Donors -2001
Source: Information Systems & Debt Management Division, ERD 2001.
The major donors viz. Japan (47 per cent), ADB (19 per cent) and IDA (8 per cent) accounted for US$ 365.7 Mn representing 73.9 per cent of the total loan disbursement.
1. 3 Foreign Aid Utilization
Although the Government had taken several steps to improve the use of foreign aid, the disbursement ratio had not improved as anticipated during the period under review. Table 1.3 shows the disbursement ratio for ADB, Japan (JBIC) and IDA funded projects during 1998 to 2001.
It is noted that the disbursement ratioof ADB portfolio has decreased from 1998 to 2001, but increased in 2001. The disbursement ratio for Japanese loans has improved by 3.2 per cent in 2001 from 2000. The disbursement ratio for IDA has improved marginally by 1.4 per cent from 2000. However, there has been a sharp decline in IDA portfolio due to low level of annual commitment over the four-year period.
Table 1.3 Disbursement Ratio for the period 1998 to 2001
Donor / Description / Currency in Mns / 1998 / 1999 / 2000 / 2001ADB / Disbursement
Beginning undisbursed balance
Disbursement Ratio / SDR* / 81
347
23% / 73
399
8% / 54
419
13% / 70.2
490.1
14.3%
Japan / Disbursement
Beginning undisbursed balance
Disbursement Ratio / JYK** / 24
178
13% / 17
176
10% / 19
161
12% / 28
184.4
15.2%
IDA / Disbursement
Beginning undisbursed balance
Disbursement Ratio / SDR / 71
314
23% / 37
255
14% / 34
239
14% / 32.8
213.3
15.4%
Source: Information Systems & Debt Management Division, ERD 2001.
* Special Drawing Rights.** Billions of Japanese Yen.
In general, the following are the main reasons for low disbursement in 2001.
- Delays in procurements and award of contracts
- Delays in loan effectiveness
- Delays in releasing Counterpart Funds
- Delay in Land Acquisition and Resettlement
- Weak and Inadequate Project Management
- Lack of Ownership
- Lack of consistent policy and policy continuity
1.1Foreign Aid Commitments and Disbursements by Sector
The chart below shows the sectoral distribution of aid commitment and disbursement in 2001. The aid commitment for ground transport, power and energy and private sector development was increased during 2001 as improvement of infrastructure was a high priority area of the Government ( see Appendix 9).
Chart 1.3 Aid Commitment by Sector – 2001
Source: Information Systems & Debt Management Division, ERD 2001.
Chart 1.4 Aid Disbursement by Sector-2001
Source: Information Systems & Debt Management Division, ERD 2001.
The highest proportions of disbursement were recorded in the power and energy sector, and the private sector development sector whereas land and irrigation, plantation and social welfare sectors have indicated lesser amounts of disbursement in 2001(see Appendix 10-11).
2. Aid Commitments and Disbursements by Donor Agencies
2.1 Bilateral donors
2.1.1 Japan
The government of Japan committed US$ 353.6 Mn through 11 agreements signed during 2001. Of this, 93 per cent (US$ 330 Mn) were loan funds and the balance 07 per cent (US$ 23.6 Mn) were grants. Commitments by Japan accounted for 47 percent of total commitment by all donors in 2001(see Appendix 2).The Loan and Grant Agreements signed in 2001 consist of the following projects.
Loan Agreements
Project.Amount (US$ Mn)
- Small and Micro Industries Leader & Entrepreneurs
Development ProjectII 38.85
2. Improvement of National Blood Transfusion Services Project 12.11
3. Southern Highway Construction Project 142.14
4. Greater Kandy Water Supply Project 39.10
5. Colombo City Electricity Distribution Development Project 45.57
6. Lunawa Environmental Improvement & Community
Development Project 52.81
Grant Agreements
ProjectAmount (US$ Mn)
1. Designing of Gampola & Muwagama Bridges 0.33
2. Improvement of Nuwara-Eliya Water SupplyScheme 3.88
3. Reconstruction of Gampola & Muwagama Bridge 11.86
4. Improvement of General Hospital Matara 2.74
5. Food Production Grant 4.82
Disbursement by Japan amounted to US$ 231.5 Mn, which is equal to 47 per cent of the total disbursements by all donors in the year 2001. Of this, US$ 212.9 Mn was loan funds and the balance US$ 18.6 Mn was grant funds.
2.1.2Federal Republic of Germany
Germany committed US$ 48.1 Mn through nine agreements signed in 2001. Of this amount, US$ 35.6 Mn (74 percent) was in loans while the balance US$ 12.5 Mn (26 percent) was in the form of grants. The commitment by Germany represented six per cent of the total commitment by all donors in 2001. As in the year 2000, Germany remains the third largest donor to Sri Lanka. The loan agreement signed in 2001 was for the Colombo Grid Substation Project for US$38.4 Mn. The following grant agreements were signed in 2001.
Project Amount (US$ Mn)
1. Support to the NDB in Environmental Protection Project 14.0
2. Project for Establishment of Poverty Impact Monitoring Unit 0.7
3. Vocational Training & Private Sector Promotion Project 1.8
4. Support to Department of Motor Traffic 0.3
5. Enterprise Service Systems PromotionProject 1.8
6. Basic Education for Children in Disadvantaged Areas 1.5
7. Financial Innovations in Rural Banking Project 0.6
8. Rehabilitation of Jaffna Peninsula Housing & Schools 2.1
Total disbursement by Germany amounted to US$ 39.4 Mn which was 08 per cent of the total disbursement by all donors in 2001. Of this amount, US$ 29.5 Mn (74.8 per cent) was in loans while the balance US$ 9.9 Mn (25.2 per cent) was in the form of grants.
2.1.3India
India committed US$ 45 Mn for the Indian Line of Credit signed in 2001 representing 5.7 per cent of the total commitment and thus became the fourth largest donor to Sri Lanka. There were no disbursement recorded in the review period.
2.1.4 Korea
The Government of Korea committed US$ 30.3Mn through two loans and one grant in 2001 which is equal to four per cent of the total commitments by all donors during 2001. Total disbursements reported was US$ 11.1 Mn, amounting to 2.2 per cent of disbursements by all donors in 2001. The following two loan agreements and one grant agreement were signed in 2001.
Project Amount US$ Mn
Loan Agreements
1.Greater Galle Water Supply Project26.7
2. Medical Equipment for Galle and Kandy hospitals 2.6
Grant Agreement
1. Installation of Navigation Equipment Project 1.0
2.1.5 United States of America (USA)
The USA committed US$ 11.5 Mn through four agreements signed during 2001. Of this amount, US$ 08 Mn (70 per cent) was in the form of loans while the balance US$ 3.5 Mn (30 per cent ) was in the form of grants. Commitment by the USA accounted for 1.5 per cent of the total aid commitment in 2001.
Grant agreements signed in 2001 were :
ProjectAmount (US$ Mn)
1. Citizens Participation Project0.5
2. Humanitarian Assistance Programme 0.3
3. Increased Competitiveness in the Global Market2.7
The PL 480 Title 1 for US$ 8 Mn for Import of Wheat was signed in 2001.
Total disbursement by the Government of the United States of America (USA) accounted for US$ 12.8Mn, which was 2.6 per cent of the total disbursement by all donors in 2001. Of this, US$ 7.5 Mn was loan funds while the balance US$ 5.3 Mn was grant funds.
2.1.6 China
China committed US$ 5.8 Mn through twogrant agreements signed during 2001. The total commitment by China represented 0.8 per cent of total commitment by all donors in 2001. China became the sixth largest donor to Sri Lanka. The two grant agreements signed in 2001 were:
Project Amount (US$ Mn)
1. Economic and Technical Cooperation5.8
2. Emergency Drought Relief 0.03
Total disbursement by China amounted to US$ 16.5 Mn, which was 3.3 per cent of the total disbursement by all donors in 2001. Of the total, US$ 7.2 Mn was in grant funds and the balance US$ 9.3 Mn in loan funds.
2.1.7 Kuwait.
The Government of Kuwait committed a supplementary loan of US$ 5.7 Mn for the Reconstruction and Rehabilitation of Bridges Project. This amount represented 0.8 per cent of the total commitment by all donors in 2001. Total disbursement reported by Kuwait accounted for US$ 2.0 Mn which was 0.4 per cent of the disbursement by all donors in the year.
2.1.8 Sweden
Sweden committed US$ 3.6 Mn through five grant agreements during the year 2001, representing 0.5 per cent of the total commitment by all donors. The grant agreements signed during the year were:
ProjectAmount (US$ Mn)
1 Swedish Consultancy Services Fund 0.55
2. High Level Training of Senior Staff-CBSL/MF 0.42
3. Central Bank of Sri Lanka Strengthening Project 0.95
4. Human Rights Commission Project 0.79
5. Training of Youth Organizations 0.83
Total disbursement by Sweden accounted for US$ 4.8 Mn in 2001. This is equal to one per cent of total disbursements by all donors in 2001. All disbursements were in grant funds.
2.1.9 Norway
Norway committed US$ 3.3 Mn through five grant agreements, representing 0.4 per cent of the total commitment by all donors in 2001. The grant agreements signed were:
ProjectAmount (US $ Mn)
1. National Integration Programme 0.26
2. Common Effluent Treatment Plant (Bata-Atta) 0.05
3. Formative Process Research of MONDEP 11 0.36
4. Establishment of National Cleaner Production Centre 1.4
5. Hambantota Integrated Coastal Resources Management 1.2
Total disbursement by Norway accounted for US$ 3.2 Mn.
2.1.10 The Netherlands
The total amount committed by the Netherlands during 2001 was US$ 2.3 Mn which was 0.3 per cent of the total commitment by all donors during the year. This was provided as a grant under the Netherlands Government Export Support Programme (ORET) for a Trailing Suction Hopper Dredger purchased by the Sri Lanka Ports Authority. The total disbursement by the Netherlands accounted for US$ 4.3 Mn. All disbursements were from grant funds.
2.1.11 Australia
There were no new commitments by Australia in the year 2001 but there were disbursements amounting to US$ 0.3Mn.
2.1.12 Canada
There were no new commitments and disbursements recorded under Canadian assistance during this period.
2.1.13 France
There were no new commitments by France in 2001, but there were disbursements amounting to US$ 0.7 Mn.
2.1.14 United Kingdom
There were no new commitments and disbursements recorded by UK in 2001.
2.2 Multilateral Donor Agencies
2.2.1 The Asian Development Bank (ADB)
The Asian Development Bank committed US$ 128.3 Mn through 15 agreements in 2001. Of this amount, 94.6 per cent (US$ 121.5 Mn) were committed in loan funds while the balance 5.4 per cent (US$ 6.8 Mn) were technical assistance grants for project preparation and sector studies. The total commitment by ADB accounted for 17 percent of the total commitment by all donors in 2001. ADB was the second largest donor to Sri Lanka. The loan and grant agreements signed in 2001 were:
Loan Agreements
Project Amount (US$ Mn)
- Private Sector Development Sub-programme-ADF85.0
- Private Sector Development Subprogramme-OCR15.0
- Colombo Port Efficiency and Expansion Project 10.2
- North-East Community Restoration and Development Project 25.4
Technical AssistanceAmount (US$ Mn)
- Small & Medium Enterprise Development 0.6
2. Secondary Towns Water Supply & Sanitation 1.0
3. Plantation Development 0.8
4. Governance & Institutional Support for Private Sector
Development 1.9
5. Integrated Cleaner Production in Industrial Development 0.8
6. Post-Secondary Education Modernisation 0 .5
7. Aquatic Resources Development & Quality Improvement 0..8
8. Transport Sector Capacity Building 0.05
9. Rural Finance Sector Development 0.55
10. Study on Pricing Policy in Petroleum Sector 0.15
11. Road Maintenance Budgetary & Expenditure 0.15
Total disbursement by the ADB amounted to US$ 93.7 Mn, which accounted for 19 per cent of the total disbursement by all donors. Of this amount, US$ 88.2 Mn was in loan funds representing 93.6 per cent of the total disbursement by ADB. The balance US$ 5.5 Mn was in the form of grants.
2.2.2 International Development Association (IDA)
The IDA committed US$ 37.1 Mn through five agreements signed in 2001. Of the total amount committed by IDA, 98.3 per cent (US $ 36.4 Mn) were for loans while the balance 1.7 per cent (US$ 0.7 Mn) were in the form of grants. Commitments by IDA in 2001 accounted for five per cent of the total aid commitment by all donors and became the fifth largest donor to Sri Lanka (see Appendix 2). The following loan agreements were signed during 2001.
ProjectAmount (US$ Mn)
1. Distance Learning Project1.9
2. Land Titling & Related Services Project4.6
3. Sri Lanka Central Bank StrengtheningProject 29.0