ADB Provides USD 100 Million for Sri Lanka’s Water Supply and Sanitation Reforms

The Asian Development Bank (ADB) has extended USD 100 million in financial assistance to Sri Lanka for the implementation of the second subprogram of the Water Supply and Sanitation Reform Program.

The financing is being provided under the Policy-Based Lending (PBL) modality to support the Government's ongoing reform agenda aimed at strengthening water security, climate resilience, environmental sustainability, service quality and the financial viability of the water sector.

The programme seeks to address major challenges in the sector, including water resource management, operational and financial inefficiencies, climate-related vulnerabilities, social inclusion gaps and fragmented coordination among stakeholders.

Through the reforms under Subprogram 2, the Government aims to strengthen water resource governance, improve drinking water safety, enhance sanitation management, promote water conservation, improve tariff and financial sustainability, encourage private sector participation and mobilise climate finance.

The Water Supply and Sanitation Reform Program is the first programmatic policy-based lending operation undertaken in Sri Lanka's water sector. It consists of two subprograms, each supported by USD 100 million in financing.

Subprogram 1, which was successfully completed in 2024, established the policy, regulatory and institutional foundations for improved water governance, climate resilience, service delivery and financial sustainability.

Building on these achievements, Subprogram 2 will support the implementation of the reforms and further strengthen sector-wide measures to deliver sustainable, climate-resilient and inclusive water supply and sanitation services.

The USD 100 million financing package comprises a USD 50 million concessional loan and a USD 50 million regular loan from ADB's ordinary capital resources.

At a time when Sri Lanka continues to consolidate its economic recovery and address its development financing requirements, the policy-based loan is expected to provide important budgetary support while advancing priority structural reforms in the water and sanitation sector.

The Ministry of Housing, Construction and Water Supply (MHCWS) serves as the Executing Agency and concurrently as an Implementing Agency for the programme. The other Implementing Agencies are the Prime Minister's Office and the National Water Supply and Drainage Board (NWSDB).

The loan agreements were signed on 6 November 2026 at the General Treasury in Colombo.

Dr. Harshana Suriyapperuma, Secretary to the Ministry of Finance, Planning and Economic Development, signed the agreements on behalf of the Government of Sri Lanka, while Ms. Shannon Cowlin, Country Director of the ADB Sri Lanka Resident Mission, signed on behalf of the Asian Development Bank.