Document of The World Bank FOR OFFICIAL USE ONLY Report No. 62630-LK INTERNATIONAL DEVELOPMENT ASSOCIATION AND INTERNATIONAL FINANCE CORPORATION COUNTRY ASSISTANCE STRATEGY (CAS) PROGRESS REPORT FOR THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA FOR THE PERIOD FY 2009-2012 June 10, 2011 Sri Lanka Country Management Unit South Asia Region International Finance Corporation South Asia Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective as of 24 May, 2011) Currency Unit: Sri Lanka Rupee (Rs) US$1 = Rs109.97 FISCAL YEAR The Democratic Socialist Republic of Sri Lanka‟s Fiscal Year: January 1-December 31 ACRONYMS AND ABBREVIATIONS AAA Analytical and Advisory Activities AF Additional Financing CAS Country Assistance Strategy CPIA Country Policy and Institutional Assessment CPS Country Partnership Strategy CY Calendar Year EU European Union FY Fiscal Year GDP Gross Domestic Product GEF Global Environment Facility GTFP Global Trade Finance Program IBRD International Bank for Reconstruction and Development ICT Information and Communication Technology IDA International Development Association IDP Internally Displaced Person IFC International Finance Corporation IMF International Monetary Fund MSME Micro Small and Medium Enterprise MIC Middle Income Country NCD Non-communicable Disease ORAF Operational Risk Assessment Framework PPP Public-private Partnership SME Small and Medium Enterprise SWAP Sector-wide Approach UPFA United People‟s Freedom Alliance WBI World Bank Institute Acknowledgements This Country Assistance Strategy Progress Report was prepared under the guidance of Diariétou Gaye, World Bank Country Director, and Per Kjellerhaug, IFC Country Manager. It was developed with the support and input of Country Sector Coordinators, country team members and colleagues in the World Bank’s Country Management Unit and IFC. Their contributions are acknowledged with great appreciation. The World Bank Group also sincerely thanks the Government of Sri Lanka for its review of this Report. World Bank IFC WB Vice President/IFC Regional Director Isabel Guerrero Thomas Davenport Country Director/Manager Diariétou Gaye Per Kjellerhaug Task Team Leader Andrea Merrick Junko Oikawa Co-Task Team Leader Susan Razzaz   TABLE OF CONTENTS I. INTRODUCTION 1 II. COUNTRY DEVELOPMENTS SINCE CAS PREPARATION 1 Changes in Country Context 1 Social and Economic Developments during the CAS Period 2 Government Priorities and Development Framework: The Mahinda Chintana 5 III. PROGRESS IN CAS IMPLEMENTATION 5 Progress in Achieving CAS Objectives and Outcomes 5 Portfolio Performance 8 IV. CAS PROGRAM GOING FORWARD 10 V. RISKS 13 APPENDICES Appendix I: Updated CAS FY09-12 Results Matrix 16 Appendix II: IDA/IBRD Lending Program FY09-12: Planned vs. Actual 25 Appendix III: Sri Lanka Trust Fund Activities FY09-12 27 Appendix IV: Statement of IFC’s Committed and Outstanding Portfolio 29 ANNEXES Annex A2: Sri Lanka at a Glance 30 Annex B2: Selected Indicators of Bank Portfolio Performance and Management 32 Annex B3: IFC Investment Operations Program 33 Annex B4: Summary of Non-Lending Services 34 Annex B5: Social Indicators 35 Annex B6: Key Economic Indicators 36 Annex B7: Key Exposure Indicators 38 Annex B8: Operations Portfolio (IBRD/IDA and Grants) 39 Map (IBRD 33485)   I. INTRODUCTION 1. This Country Assistance Strategy Progress Report, jointly prepared by the World Bank and the International Finance Corporation (IFC), reviews the implementation of the World Bank Group’s FY09-12 Country Assistance Strategy (CAS) for Sri Lanka. Discussed by the Board of Executive Directors on 5 June, 2008, the joint World Bank/IFC CAS had been prepared against the backdrop of a protracted civil conflict. In a complex and challenging environment, the CAS adopted a focused, flexible and conflict-sensitive approach to the Bank Group’s engagement in Sri Lanka. In this context and with the aim of supporting the Government’s Mahinda Chintana ten-year Development Framework, the CAS set out for the World Bank Group to assist Sri Lanka in: (i) expanding economic opportunities in lagging regions; (ii) improving Sri Lanka’s investment climate and competitiveness; and (iii) improving the quality of services and accountability. 2. There have been significant developments in Sri Lanka since the CAS was discussed by the Board. Sri Lanka’s three-decade long civil war ended in May 2009. The country is also transitioning from a Low to a Middle-Income Country (MIC). An IDA-only borrower when the current CAS was prepared, Sri Lanka was declared creditworthy for IBRD financing in December 2010. This Progress Report examines these developments and their implications for Sri Lanka’s CAS program moving forward. While the strategic objectives of the FY09-12 CAS remain relevant for its last year, the new country context, as highlighted in this report, will form the backdrop to the next Country Partnership Strategy (CPS). II. COUNTRY DEVELOPMENTS SINCE CAS PREPARATION Changes in Country Context 3. Perhaps the most significant development during this CAS period was the cessation of Sri Lanka’s three-decade civil war in May 2009 following the defeat of the Liberation Tigers of Tamil Eelam. A CAS designed to support a country in conflict now serves a country emerging from conflict. While the reconciliation agenda still looms large, rehabilitation in the conflict-affected areas of the North and East, including major new investments, and resettlement of Internally Displaced Persons (IDPs) have been proceeding relatively rapidly and smoothly. As of the end of April 2011, around 16,600 people are living in IDP camps, down from 300,000 in late 2009. The Government demining program has cleared 793 out of the total 1,287 square kilometers mined area. 4. The political mandate of President Mahinda Rajapaksa and the United People’s Freedom Alliance (UPFA) has grown since the end of the civil war. Three levels of elections have taken place. The Presidential election in January 2010 gave Mahinda Rajapaksa a 58 percent majority. The UPFA won 144 of the 225 seats in the April 2010 Parliamentary elections. UPFA received 56 percent of the vote (giving them the majority of seats) in Local elections conducted across the country at various times between March 2008 and March 2011. 1 5. In addition to emerging from conflict, Sri Lanka is in the process of transitioning from a low-income to a middle-income country. Strong economic growth performance has brought Sri Lanka’s per capita income to US$1,990, above the FY11 operational IDA cut-off of US$1,165. (This gross national income per capita for 2009 is as per the World Bank Atlas methodology. The Atlas method applies a moving average of exchange rates in order to reduce the impact of exchange rate fluctuations in international comparisons. The official Sri Lankan Government figure for per capita income for 2010 is US$2,399.) The Government aims to transform Sri Lanka into the “Wonder of Asia”, doubling per capita income by 2016 through sustained 8 percent annual growth. Growth prospects are strong, driven by the peace dividend, recent changes in the tax and investment regime, and private sector confidence. 6. Sri Lanka was declared creditworthy for IBRD financing in December 2010, following an assessment of the country’s creditworthiness by the Bank’s Credit Risk Department. As of FY12, Sri Lanka will be an IDA-IBRD blend country and can look forward to IDA16 resources as well as the introduction of IBRD lending. Social and Economic Developments during the CAS Period 7. Sri Lanka has made significant progress in reducing poverty. Excluding the conflict- affected North and East, the incidence of poverty, as measured by the poverty headcount ratio, fell from nearly 23 percent in 2002 to 15 percent in 2006/7 and 8.9 percent in 2009/10. The rapid decline in poverty has been felt in urban, rural and plantation areas. Average household income has increased three-fold during this period, contributing significantly to the reduction in poverty. Strong economic growth over this period, substantial foreign assistance following the 2004 Tsunami, increased public investment in infrastructure, and growing remittances have also contributed to the rapid decline in poverty. 8. Sri Lanka has surpassed or is close to achieving many of the Millennium Development Goals. Of particular note, have been its achievements in health and education service delivery, notwithstanding gaps in some geographical pockets and amongst vulnerable groups, such as IDPs, the rural poor and those on estates and in conflict-affected areas. Progress in promoting gender equality has also been commendable. The 2010 Gender Gap Report presented at the World Economic Forum ranked Sri Lanka 16th out of 134 developing and developed countries in terms of closing gender gaps. 1 While women fare well compared to men in education and health indicators, they are, however, lagging behind in terms of economic participation. Labor force participation rates remain relatively low, and unemployment rates (while not extremely high overall) are double those of men. The quality of work is also relatively low, with women more predominantly working in low-paying, lower-skilled jobs, in the formal and informal sectors, and in overseas domestic service. 9. Demographic and epidemiological transitions are accompanying Sri Lanka’s shift to a MIC, with significant implications for various sectors of the economy. The ageing of the Sri Lankan population has been one of the fastest in the world, and requires policies both to take advantage of the demographic dividend before the proportion of working population begins to 1 The report’s Global Gender Gap Index examines the gap between men and women in economic participation and opportunity, educational attainment, health and survival and political empowerment. 2 shrink and to prepare the economy and infrastructure for the expected changes in the country’s age structure. The related epidemiological transition stems from a growing burden of non- communicable diseases (NCDs), already matching significantly higher income countries. Sri Lanka is facing these transitions, however, with a much smaller resource base than most developed nations. 10. In November and December 2010, Sri Lanka was hit by the heaviest rains in one hundred years resulting in devastating floods and landslides. More than 1.2 million people were affected by the floods and around 363,000 people were displaced in 630 temporary relocation centers. In total, 16 out of 25 districts were affected by the floods mostly located in Eastern, Northern and Central Provinces. The three districts of the war-affected Eastern Province – Batticaloa, Ampara and Trincomalee – suffered the most. Although flood waters started receding and the displaced families began to return to their homes in January 2011, new floods in January and February 2011 exacerbated an already difficult situation. According to the World Food Program, around 500,000 people became food-insecure requiring immediate food assistance to avoid hunger and malnutrition. Widespread destruction of houses, roads, agricultural land, livestock, livelihood assets, and other infrastructure have been reported, with dramatic impacts on the livelihoods of the population, especially those just recovering from the long conflict. 11. Sri Lanka’s economy has seen significant changes since the time the CAS was drafted. The CAS was prepared in 2008, in the midst of Sri Lanka’s conflict and before the brunt of the international economic crisis was felt. The year 2009 saw the end of the civil war, the beginning of post-conflict reconstruction and the effects of the international economic crisis. As a result, the fiscal deficit rose, international reserves fell and the financial system came under strain. A program of policies was developed to address these issues, supported by a US$2.6 billion International Monetary Fund (IMF) Stand-By Arrangement signed in July 2009 designed to help the country recover from a balance of payments crisis triggered by the global financial crisis and return it to long-term, sustainable growth. As of April 2011, six reviews of the economic performance under the IMF Program have been completed, bringing total disbursements under the arrangement to about $1.75 billion. 12. While GDP growth dropped in 2009 with the global economic crisis, the country’s economy has since rebounded, bolstered by end-of-conflict effects of increased agriculture production in the North and East, exceptional growth in the tourism sector, and government spending on reconstruction. After growing just 3.5 percent the previous year, the Sri Lankan economy grew by 8.0 percent in 2010. Growth was broad-based: agriculture grew by 7.0 percent; industry grew by 8.4 percent; and services grew by 8.0 percent. The Sri Lankan banking sector proved resilient to the effects of the global crisis and the Central Bank acted quickly to intervene in the failed Seylan Bank and to prevent failure of other financial institutions. The end of the civil war has also led to easier movement of goods and people and to a general increase in business confidence. 13. Sri Lanka remains heavily reliant on financial flows to finance its trade deficit. Sri Lanka’s trade deficit widened to 10.3 percent of GDP in 2010 as both the volumes and prices of imports outstripped the volume and prices of exports by a wide margin. Exports continue to be 3 limited by lack of diversification, the declining terms of trade, declining competitiveness (as indicated by the increasing real effective exchange rate), and the fact that Sri Lanka’s exports are strongly focused on slow-growing economies of the US and EU. The trade deficit has been financed by tourism, remittances and financial flows. Although remittances have been consistent over several years and tourism income is expected to continue to grow, financial flows – largely portfolio flows – are susceptible to sudden reversals. 14. Inflation, which had been high in 2008, has been under control throughout the CAS period due to a combination of sound monetary policy, improved domestic supply and declining international commodity prices during the international economic slowdown. Inflation has recently risen again, however, reaching 8.6 percent in March 2011. While food prices increased sharply in the wake of the heavy floods between late 2010 and early 2011, adequate buffer stocks of rice should ameliorate the flood effect on food prices in the medium and longer term, despite the significant losses in the spring paddy crop. While the price for fuel has recently increased, fuel prices have had a minimal impact on inflation to date. These supply shocks have not spilled over into inflationary expectations. 15. In 2009, weak revenue performance combined with increased government spending – both in terms of the wage bill and investment – resulted in a fiscal deficit of 9.9 percent of GDP, raising concerns about unsustainable debt dynamics. The overall debt-to-GDP ratio declined from over 100 percent prior to 2005 to 81 percent by 2008, increasing to 86 percent in 2009, and then resuming its declining path with 82 percent in 2010. Since 2009, the Government has taken important steps to reign in the deficit including efforts to control expenditure, increase revenue and support GDP growth. Fiscal consolidation began in 2010 as the deficit narrowed to 8 percent of GDP. Expenditure fell from 24.9 percent of GDP to 23 percent of GDP, mainly through cuts in defense, subsidies and transfers. The 2011 budget focuses significant attention on providing incentives for GDP growth and increasing revenue through investments in economic infrastructure and tax reform. The key features of the tax reform include broadening the tax base, simplifying the tax structure, and reducing tax rates. 16. As the fiscal situation has become less critical, efforts to improve the investment climate have risen toward the top of the economic policy agenda. A significant increase in private investment is needed to reach the Government’s target of sustained 8 percent growth. In recognition of this fact, the Government has announced its intention to improve Sri Lanka’s ranking in Doing Business to 30th place by 2016. 2 It has set up an inter-agency Steering Committee headed by a senior policymaker and has embarked on the process of streamlining the procedures of government agencies to achieve the set targets. This process has created a coordinated cross-sectoral approach to improving the business environment. The Central Bank has prepared A Guide to Doing Business in Sri Lanka which is revised periodically and is closely monitoring the identified reforms in respective agencies, designed to reduce transaction costs for investors. This work is being supported by the World Bank Group and other development partners. 2 Sri Lanka ranked 102nd out of 183 countries in the World Bank’s 2011 Doing Business report. 4 Government Priorities and Development Framework: The Mahinda Chintana 17. The FY09-12 CAS set out for the Bank Group to support the overall objectives of the Government’s 10-year Development Framework, the Mahinda Chintana: Towards a New Sri Lanka. The Mahinda Chintana’s central areas of focus were: (i) achieving more equitable development through accelerated rural development; (ii) accelerating growth through increased investment in infrastructure; and (iii) strengthening public service delivery. 18. To reinvigorate the Government’s socio-economic development strategy, an update, entitled Mahinda Chintana: Vision for the Future, was presented in January 2010 in the buildup to Presidential elections. Central to the Government’s updated strategy is the objective of repositioning Sri Lanka both regionally and in the global arena as a strong, knowledge-based MIC. Underlining the strategy is the aim of transforming Sri Lanka into a regional hub in the areas of commerce, energy, aviation, shipping and knowledge, and doubling per capita income to over US$4,000 by 2016. To achieve its vision, the Government emphasizes the significance of an active private sector, continued development of agriculture and small and medium enterprises (SMEs), the investment climate, transport, infrastructure, health and education and skills development. Doubling per-capita income by 2016 is anticipated to require annual growth rates of more than 8 percent which, in turn, will require investment of 33-35 percent of GDP each year. With public investment expected at 6-7 percent of GDP per year, the private sector is recognized as central to achieving these goals. III. Progress in CAS Implementation Progress in Achieving CAS Objectives and Outcomes 19. The Sri Lanka CAS was jointly prepared by the Bank and the IFC at a time of civil conflict. Accordingly, the CAS adopted a focused and flexible approach to the areas of Bank Group engagement. The proposed Bank lending program was based on a series of narrowly- scoped investment projects. Particular emphasis was placed on community-focused projects and projects delivered through local and provincial governments, with the aim of providing infrastructure, public services and livelihoods at the local level. Significant investments were foreseen for a series of road projects to improve the quality of national and provincial roads in selected provinces to foster more balanced regional development. Lending and non-lending activities identified for the CAS period aimed to support the CAS’ three strategic objectives: (i) expanding economic opportunities in lagging regions; (ii) improving Sri Lanka’s investment climate and competitiveness; and (iii) improving the quality of services and accountability. In this connection, IFC’s areas of focus have centered on: (1) inclusive growth, emphasizing the base of the pyramid, rural areas, infrastructure building and access to finance for Micro Small and Medium Enterprises (MSMEs); (2) climate change, including adaptation and mitigation; and (3) global and regional integration via improved financial infrastructure, investment climate reforms, trade financing, logistics, and South–South investments. 20. Progress in achieving the CAS objectives has generally been encouraging. As detailed in the updated CAS Results Matrix (Appendix I), outcomes have been particularly impressive in education, health, access to public services and infrastructure in the North and East 5 and other provinces to bring more balanced regional development. The share of rural population in the North and East with access to basic infrastructure facilities has increased from 9 to 15 percent between 2008 and 2011. Economic opportunities in these provinces have also been improving. In the Eastern province, for instance, unemployment fell from 7.7 percent in 2009 to 5.3 percent in 2010. In the case of education, many of the specific objectives for improving quality, relevance and governance of education have been surpassed. Bank and IFC support for Sri Lanka’s renewable energy sector is having a transformational impact and is benefitting from increased private sector participation. The Bank’s assistance to the health sector has helped to build provincial and district level capacities for output-based planning and monitoring, and contributed to improvements in efficiency, quality and utilization of health services in all nine provinces. IFC investments have been complementing the Bank’s health sector support. Improvements in the extended network of national and provincial roads in the North, East and Uva have facilitated and/or improved connections to and from socio-economic centers. With Bank support, a Road Maintenance Fund has been established and environmental safeguards are being mainstreamed into road development. Bank and IFC support to SMEs, including in less developed southern regions, has helped build entrepreneurship, computer literacy skills and supplier chains, and provided access to finance. 21. Progress has been slower in a few areas prompting a reassessment of related results indicators, as reflected in the updated Results Matrix. Specific activities have evolved in line with shifting circumstances, priorities and through dialogue with the Bank and sector and Ministry of Finance counterparts. Engagement in the environment sector, for instance, has been more limited than originally foreseen, as Government priorities have evolved and the planned program subsequently changed. Results in this area (CAS outcome 3.3) have been modified accordingly, to reflect the more modest expectations anticipated for the remainder of the CAS period. Several results indicators related to road improvements have also been revised as project developments have recommended. For example, while expecting to undertake minor maintenance to improve the condition of rural roads (CAS outcome 1.1), the quality of the roads was discovered to be significantly poorer than expected, calling for major rehabilitation. The few additional adjustments to results indicators highlighted in the Matrix reflect the evolution of the CAS, including as several activities were added or dropped in response to emerging Government priorities. 22. As the CAS had anticipated, the process of strengthening governance in Sri Lanka is longer term in nature. Progress has been slower on improving the relevance and transparency of public spending (CAS outcome 2.3), including in the areas of public procurement, financial management and audit legislation. Modifications to programmed non-lending support in this area, motivated by evolving Government priorities, have impacted on the pace of progress. There has, however, been progress in a number of governance-related areas which the CAS sought to support, including instituting corporate governance regulations for the banking sector and establishing key fiduciary parliamentary committees. To help promote good corporate and risk governance, the IFC carried out a workshop for financial institutions, along with other initiatives. Efforts to improve transparency and accountability in service delivery are advancing as stakeholder participation has broadened and decision making brought closer to beneficiaries. The number of local authorities preparing annual participatory development plans and budgets has increased fourfold. School-based management has increased, and community-driven 6 development projects now cover 20 out of 25 districts in the country. Transparency has also been strengthened with the introduction of information and communication technology (ICT) in government agencies and an increase in online access to public services. Engagement on the governance agenda continues to expand with Government recently expressing interest in support for financial management, procurement and environmental safeguards practices and strengthening audit capacities. 23. A number of projects in the portfolio are having demonstrable impacts. The Renewable Energy for Rural Economic Development Project, for example, has helped to launch a domestic industry focused on innovative solutions to provide low-carbon affordable energy to consumers without access to electricity. The number of rural households electrified by off-grid electrification has risen by 52 percent since 2008. The amount of renewable energy supplied to the national grid from small and medium generation plants has increased more than five-fold in less than a decade. The industry is now increasingly expanding overseas. An IFC-supported risk sharing facility with two commercial banks, in combination with advisory services, is supporting small hydro and wind power projects with total installed generation capacity of 65.4MW thus far. The Education Sector Development Project and the Health Sector Development Project, both designed using a sector-wide approach (SWAP), have had transformational impacts on the education and health systems. With respect to health, for instance, social care centers for vulnerable groups have increased by 63 percent since 2008 and are being used. The number of women over 35 now screened for cervical cancer is 112 percent higher than in 2007. A national action plan for prevention of NCDs and surveillance system have been developed. School survival rates for students through grade 9, primary school students' achievement rates in mathematics and English language achievement scores of undergraduates have all exceeded targets. Bank and IFC support for ICT and technology-enabled innovation is serving to promote private sector competitiveness, expand electronic government services and reach out to communities in rural and remote areas. The Bank’s e-Sri Lanka Development Project, has established over 600 tele-centers throughout the country, linking over 70,000 users monthly, half of whom are women. The project has trained 35,000 private sector participants to incorporate ICT into their business and is helping to improve government efficiency and transparency, as noted above, by introducing ICT in government agencies and taking public services online. Enhancing its financing for Dialog, IFC's advisory support to build MSME capacity trained 2,250 participants to date and helped increase collective revenues in FY10 by US$2.6 million. IFC is also helping strengthen technology-based financial infrastructure through, for example, the establishment of Secured Collateral Registry. Through the Performance Based Grant Initiative, IFC encouraged expansion of microfinance services to urban and rural lower income segments by LOLC Micro Credit and SANASA Development Bank. Focusing on the post- conflict and less developed regions, IFC’s support helped these microloan providers to increase aggregate clients and portfolio by 136,000 and US$182 million, respectively, within a year. 24. A review of the Bank’s analytical program in Sri Lanka during this CAS period reveals a relatively small portfolio of analytical products that would benefit from greater strategic focus. There is scope to address crucial analytical gaps related to Sri Lanka’s transition to a MIC and to translating the Mahinda Chintana vision into action, such as how to foster private sector-led growth or facilitate public-private partnerships (PPPs). The Sri Lanka analytical program does contain a number of examples of successful collaboration with 7 Government. Connecting People to Prosperity on infrastructure and economic integration, for instance, was developed together with local academics, with rigorous and innovative data. Recent work on floods offered Government a new model of response to disasters which was scaled up nationally and is becoming the backbone of lending for urban development. In the education sector, the Towers of Learning report is widely cited. Three key complementary analytical pieces in the current CAS program aim to deepen the understanding of the rural-urban transformation process in the country: the Connecting People to Prosperity report, the Sri Lanka Country Environmental Analysis and the Sri Lanka Infrastructure Assessment. Diagnostic studies undertaken by IFC are supporting efforts by client banks to increase access to finance by households and businesses through micro-, agri- and SME finance, with special attention to increasing balanced regional development and preventing inequality. Numerous other examples of significant AAA exist, including on capital markets, telecoms regulation and pensions. What has become evident is that concise, strategic Policy Notes are particularly valued. Portfolio Performance 25. Sri Lanka has had a healthy Bank portfolio, with projects at risk constituting around 6 percent of the portfolio and 3 percent of commitments. As of end-April 2011, the active IDA portfolio in Sri Lanka consists of 16 projects with a net commitment value of US$1.26 billion. Five projects, designed to help those affected by the conflict to resettle, absorb about 47 percent of total commitments. Four projects are supporting infrastructure development (roads, dams, energy), accounting for 42 percent of total commitments. Two projects are focused on the modernization of government administration. In the education sector, two projects account for close to 10 percent of total commitments. Amongst the most recent approvals are projects supporting productive investment in tourism and SMEs. Additional Financing (AF) has become a significant lending instrument during this CAS period, in terms of project performance, cost- effectiveness and in enabling the Bank to swiftly respond to unforeseen or emergency needs, such as for post-conflict reconstruction or in response to the 2010/2011 floods. There are currently four AF operations in the project portfolio. Two projects in the portfolio, the Puttalam Housing Project and the Second Community Development and Livelihood Project, are currently classified as problem projects with moderately unsatisfactory ratings. 26. IFC has increased the number of new commitments and sought to diversify its portfolio during this CAS period. Annual commitments will have averaged around US$45 million during FY09-11. New commitment volumes in Sri Lanka had peaked at US$175 million in FY08, in the wake of two large transactions. Since FY09, and as of mid-June 2011, IFC has invested a total of US$126 million in renewable energy (including its first direct investment in wind power), healthcare and the financial market (including Global Trade Finance Program (GTFP) trade finance facilities). Its first direct investment in a private equity fund is expected shortly. As of April 2011, IFC’s committed portfolio of $132 million consisted of ICT companies promoting enhanced communication access, commercial banks supporting SMEs’ trade and sustainable energy, a credit rating agency, hospitals, and a Sri Lankan hotel operator active in the region. The portfolio is generally performing well. IFC’s investment and/or advisory support for the financial sector has focused on developing local banks’ capacity to provide trade financing, renewable energy financing, SME- and agri-finance, and household access to finance. IFC has been providing locally-scarce financial instruments, such as risk capital, trade finance guarantees, and risk sharing facilities. Risk sharing facilities, structured 8 with a first-loss partial guarantee from the Global Environment Facility (GEF), are helping two leading national banks develop know-how in financing private sustainable energy projects. IFC is also supporting leading private hospitals to help meet the country’s growing demand for healthcare. 27. IFC’s advisory services have also been supporting SMEs, providing technical assistance to financial institutions and maximizing linkages in tourism, ICT and agriculture. IFC’s ongoing sustainable tourism advisory project facilitated 260 SME contracts and US$72,000 in sales revenues for participatory MSMEs in CY2010. In response to the growing interest in PPPs, IFC, in collaboration with the World Bank and World Bank Institute (WBI), held a well-received workshop in Colombo on the topic for government and the private sector. 28. A review of CAS implementation to date reveals that a considerable number of planned activities were dropped and others added. As detailed in both the updated CAS Results Matrix and Appendix II on planned IDA/IBRD Lending Program for FY09-12 and actual deliveries, of the 15 proposed lending activities, five were dropped and two (road projects) were transformed. Of the 12 programmed AAA activities, three were dropped and two refocused. As of May 2011, four projects, three AF operations and four AAA activities which had not been foreseen in the CAS Program were added, the latter as reflected in Annex B4 along with additional technical assistance support which had not been envisioned in the CAS. IFC’s program has also responded to emerging opportunities over the course of the CAS period. 29. Changes in the CAS program reflect the Bank Group’s flexibility and responsiveness to evolving Government priorities in the aftermath of the civil war and as the MIC agenda has come to the fore. Emerging demands for Bank support, including for reconstruction and reconciliation efforts in which fewer donors were involved, necessarily required some re-prioritization of the Bank program. Where the evolution of the portfolio resulted in dropped projects, such as for water and irrigation, such changes were made in the context of other donors’ engagement in these areas. Some additions to the lending program reflect responses to emergency situations. The Emergency Northern Recovery Project, for instance, was developed to address post-conflict issues, supporting the Government’s efforts to rapidly resettle IDPs in the Northern Province. The SME Development Facility Project was designed, together with IFC, to improve access to finance for SMEs impacted by the global financial crisis, benefitting from funds from the Crisis Response Window. In parallel, IFC increased GTFP trade finance facilities to help Sri Lanka weather the impact of the crisis, totaling US$75.5 million (with 9 commitments) in FY09-11. Most recently, the Bank responded to a request from the Government for emergency support following the devastating floods between December 2010 and February 2011. A US$38 million Additional Financing Credit to the established Community Livelihoods in Conflict-Affected Areas (Reawakening) Project, will assist flood victims in rehabilitating their land, restoring village infrastructure and re-establishing their livelihoods. 30. The Program has made significant use of trust fund resources during the CAS period, supporting both analytical work and projects. As Appendix III highlights, trust funds have supported activities in a range of areas, from technical assistance on PPPs for infrastructure 9 development, to avian influenza preparedness, to renewable energy. Trust funds have significantly bolstered post-conflict and reconstruction efforts, including considerable Australian support for the Emergency Northern Recovery Project. Trust funds have also afforded meaningful support for the Government’s efforts to reform its main safety net program, Samurdhi, as well as for undertaking critical post-disaster needs assessments. Likewise IFC’s private sector development support benefited from donor support, including Norway for the Sri Lanka Development Facility, and NIPP 3 and DevCo 4 for the South Asia Infrastructure Facility. 31. The donor landscape in Sri Lanka has continued to evolve. While the Bank has traditionally been one of the ‘big three’ donors in Sri Lanka, together with Japan and the Asian Development Bank, China and India are now emerging as the largest donors. As Sri Lanka transitions to MIC status, the Government has broadened its options for foreign financing for public investment, in a mix of less or non-concessional financing and the available concessional financing. Concessional assistance from western bilateral partners in general has diminished whilst financing in the form of export credits has increased. Donor coordination on humanitarian, rehabilitation and development assistance continues, including through such mechanisms as monthly Development Partners Meetings and the Donor Peace Support Group which monitors the conflict transformation and peace-building process. The Bilateral Donor Group continues to address key issues pertaining to bilateral funding and advocacy. IV. CAS Program Going Forward 32. The current CAS pillars remain relevant for its final year, notwithstanding some changes to the project portfolio as discussed above. Both the MIC and post-conflict reconciliation agendas are well entrenched in the CAS’ existing strategic objectives of expanding economic opportunities and improving investment climate, competitiveness and the quality of services. Indeed, the CAS’ particular aims of inclusive and sustained economic growth and effective public and social services have taken on new significance in the country’s current context. While several results indicators have been adjusted in response to the evolution of the CAS program, no amendments to the strategic objectives are deemed necessary for FY12. The strategy will be reconsidered over the course of the next fiscal year as part of the preparation of a new CPS for FY13-16. 33. The main adjustment to the lending program during the remainder of the CAS period will stem from Sri Lanka’s transition to IBRD/IDA blend status from FY12. Discussions between the Bank and the Government are underway, alongside internal consultations within the Government to build consensus on what would be financed on IBRD versus IDA terms. As a first priority, the Bank is arranging a comprehensive briefing for the Government on the instruments and options available with IBRD financing and how these might be assessed within the context of their IBRD/IDA blend status. Among the opportunities to be discussed and for consideration moving forward, are the potential use of MIGA guarantees. For 3 The Netherlands-IFC Partnership Program. 4 The Infrastructure Development Collaboration Partnership Fund, an untied facility established by IFC and the United Kingdom’s Department for International Development and supported by the Dutch Ministry of Foreign Affairs and the Swedish International Development Cooperation Agency. 10 FY12, it is expected that IBRD funds would be applied, together with an IDA credit, for the proposed Metro Colombo Integrated Urban Development Project. Appendix II highlights the indicative lending program expected for FY12 which includes a project on Transforming School Education as the Foundation for a Knowledge Hub and the preparation of a Health Sector Development project programmed for FY13 (the Government’s FY12). IBRD lending is expected to increase for the next CPS period, within which IDA16 resources will also be available. 5 34. A review of CAS implementation to date has underscored the need for greater selectivity as well as the centrality of Government demand for a given activity. These lessons will inform both the approach and scope of the CAS Program moving forward, including in the final year of this CAS period. The corollary of greater selectivity is likely to be fewer and larger projects. In this context, coordination and collaboration, not only with IFC and MIGA, but with Sri Lanka’s other key development partners will remain particularly important. The World Bank and IFC anticipate increased collaboration in the areas of tourism, agribusiness and PPP- based infrastructure. There is a considerable opportunity to support PPP-based infrastructure development particularly in the post-conflict areas. Comprehensive Bank-IFC support, coupled with Government leadership, would help accelerate progress in this critical space. 35. AAA will take on new significance as the Bank seeks to help bolster Sri Lanka’s transition to a MIC. As noted above, and further to the review of the Bank’s existing AAA program, analytical and advisory work will look to become more strategic and selective. AAA will also be designed to inform potential operations as well as to identify priorities and options in a given sector or area for Government consideration. During the remainder of the current CAS period, AAA will focus on understanding the challenges related to implementation of the Mahinda Chintana goals as outlined in Section II and identifying a range of approaches to implementation based on experiences of other middle-income countries. Special emphasis will be placed on the financial sector and improving the investment climate, as well as on sectors of likely future lending including transport, education, health and urban development. Moving forward, WBI stands placed to work with local institutes and think tanks to support capacity development across priority areas. 36. In line with its transition to a MIC, the Government has signaled its interest in Bank support for global knowledge exchange. From FY12, it is anticipated that Sri Lanka will be part of the South-South Knowledge Exchange Brokering Pilot, recently launched by WBI. Working with a number of pilot countries, the initiative will both document selected areas of knowledge supply and facilitate country matches for learning exchanges. WBI has been supporting knowledge generation and capacity development in Sri Lanka for a number of years, including on local governance, social accountability, strengthening of health systems and PPPs, 5 IDA16 allocations will be determined in June 2011 but are expected to be at least equivalent to IDA 15 levels, assuming that Sri Lanka's CPIA ratings do not deteriorate. IDA15 resources during the current CAS period of FY2009-2011 were SDR402.2 million. The IDA lending plan for FY12 (Appendix II), for which IDA16 resources would be allocated, is indicative and could change depending on: (i) total IDA resources available, (ii) the country’s CPIA performance rating, (iii) the number of IDA eligible countries, (iv) the performance and assistance terms of other IDA-eligible countries, and (v) the terms of IDA’s assistance which are determined annually and based on the risk of debt distress. IDA allocations are made in SDRs, and the US dollar equivalent is dependent upon the prevailing exchange rate. 11 the latter in conjunction with the IFC. The South-South Facility, a multi-donor trust fund managed by WBI has funded a number of learning exchanges with Sri Lanka. In March 2011, two exchanges were approved in skills development and local governance. Moving forward, WBI could assist Sri Lanka in design and implementation of knowledge exchanges in areas where it would like to learn from its peers, such as on managing demographic transition and use of public-private partnerships for modernizing infrastructure. Sri Lanka’s Distance Learning Center in Colombo, part of the Global Development Learning Network, could help implement some of these exchanges. 37. Given the improved political and security environment, IFC is actively developing a pipeline of investment and advisory projects, with an emphasis on development impact, including in post-conflict areas. In FY12, IFC expects to finance projects in commercial banking, trade, agribusiness and tourism. In addition, IFC plans to develop projects in renewable energy, health, and education. Most of these projects are expected to be complemented by advisory services, including SME linkages support. Further, IFC would explore additional equity investments in financial intermediaries such as microfinance and private equity funds, to further broaden outreach to small to medium-sized companies. Access to finance advisory services will explore the feasibility of low-cost financial services, including mobile banking. Building on its global and regional experiences, IFC will also be well placed to support PPPs in Sri Lanka, together with the World Bank. 38. To address the civil conflict ongoing at the time, the CAS identified a set of five questions to be considered during the concept, design and implementation stages of Bank lending operations. This “Conflict Filter” was intended to help task teams identify and assess conflict risks and opportunities in operational engagement. This tool evolved over the CAS period and was later renamed the Reconciliation and Conflict Filter to capture the transition from active conflict. In light of the introduction of the Operational Risk Assessment Framework (ORAF) 6 and the improved situation in Sri Lanka, it is expected that from FY12 reconciliation and conflict issues will be mainstreamed through the ORAF. 39. The Bank’s support for Sri Lanka’s ongoing reconciliation and reconstruction agenda will continue in tandem with the expanding MIC agenda. Sustained and inclusive economic growth and development, and effective institutions and service delivery are priorities at the heart of both agendas. Of the 5 projects in the current IDA portfolio directly supporting the country's post-conflict and reconstruction agenda, only one is expected to end in FY11, with the remaining 4 completing at varying stages between FY12 and FY16. 7 Analytical work currently underway on equitable growth and regional disparities will also serve both the country’s post- conflict and MIC agendas. 6 The ORAF is a new integrated framework applied to all World Bank investment lending projects in all countries. It helps teams to look systematically and holistically at risks to the achievement of a project’s key results, from identification to implementation. 7 The Puttalam Housing Project is expected to close end-June 2011; North East Housing Reconstruction Program December 2011; Emergency Northern Recovery Project December 2012; Community Livelihoods in Conflict- Affected Areas (Reawakening) Project March 2013; and the North and East Local Services Improvement Project December 2015. 12 V. RISKS 40. A number of risks could affect the implementation of the CAS program for its remaining period. The most significant potential risks, as discussed below, include external risks impacting on the country’s economic and financial stability, internal risks which could impact on the Government’s growth and reconciliation agendas, and the risks of natural disasters and climate change. External Risks 41. There are several external risks, which could complicate Sri Lanka’s economic recovery from the conflict and international economic slowdown. Continued increases in international commodity prices – particularly petroleum – could fuel inflation and exacerbate the trade deficit. To the extent that inflation is coming from outside, as in the case of commodity prices, economic distortion can be minimized by passing increases onto businesses and consumers while providing targeted safety nets as needed to protect the poor. 42. An additional external risk is a continued economic slowdown in Sri Lanka’s export markets. Sri Lanka’s output growth as well as its external balances require continued demand for Sri Lanka’s exports, such as high-end apparel, tea and rubber, as well as continued tourism- related earnings. This risk can be mitigated by increased integration into the economies of fast- growing markets such as India and China. Sri Lanka’s external balances are also highly dependent on private portfolio flows and impacted by remittances. A disruption in the economies hosting Sri Lankan workers (primarily the Middle East), or a reversal in financial flows could put Sri Lanka’s external position at risk. A slowdown in economic activity in Sri Lanka from whatever source would result in a decrease in Government revenues, hampering further reductions in the fiscal deficit. Internal Risks 43. There is a risk that the business climate and international competitiveness would not improve. If business climate improvements are not extensive enough or do not come soon enough, the private investments needed to sustain growth will not materialize. As a consequence, the Government’s goals of increased per capita income and deficit reduction (through increased revenues) would not be reached. The declining trend in exports as a share of GDP highlights external sector risks. If the exchange rate is not adequately flexible, export competitiveness and external solvency could become problems. External solvency could also become a problem if exports are not diversified and reoriented toward fast growing neighbors. In this regard, stalled progress on signing the Comprehensive Economic Partnership Agreement with India poses a risk. To better understand and to help mitigate this risk, the Bank is providing AAA on the topics of economic growth and investment climate. 44. As highlighted in paragraphs 11 to 15, the macroeconomic situation has improved significantly since 2009, though some risks remain. Sri Lanka's public debt has begun to decline due to fiscal consolidation steps in 2010, as well as the 2011 budget measures previously described. It will be important that efforts continue to further refine and boldly implement these measures to maintain public debt on a sustainable path. Continued progress on macroeconomic 13 policy and reforms to develop an investor-friendly climate will also be important for stimulating private investment and sustained growth, which will further enhance debt sustainability. Demand-driven inflationary pressures are not yet apparent, but could emerge quickly if excess liquidity in the banking system accommodates a further acceleration in credit growth. With import growth likely to outpace remittances, meeting reserve targets will test the government’s commitment to exchange rate flexibility. And, although the government remains determined to eliminate the combined losses of the two energy enterprises this year, persistently high international oil prices will require politically difficult increases in domestic retail prices. The Bank stands ready to provide technical assistance to mitigate these risks. 45. Slowing of progress on inclusive government could pose a risk to continuing reconciliation from the civil war and sustained growth, including accelerated private investment. Efficient, transparent and effective public spending and policies will be important to achieving the poverty reduction and economic growth targets in the Government’s medium-term strategy, within a sound fiscal framework. The President and Government's strong mandate provides a platform for advancing on a political solution to the underlying socio-ethnic issues linked to the conflict. A continuation of the Government’s efforts to revitalize the economy of the North and East, including through major new investments, and to expand the political dialogue will be essential for the long term peace and prosperity of Sri Lanka. Natural Disaster and Climate Change Risks 46. Sri Lanka is prone to several natural hazards, some of which may be becoming more severe and/or more frequent due to climate change. Flooding is the most recurrent natural hazard, but the country is also vulnerable to landslides, coastal erosion, drought, cyclones and tsunamis, with coastal zones and cities particularly vulnerable. The increasing vulnerability of Sri Lanka to natural disasters and climate change and the high socio-economic losses associated with it, calls for a proactive strategy focused on disaster preparedness, mainstreaming of risk mitigation in development and urban plans and moving to a multi-sectoral approach to disaster management and climate change adaptation. The Government has made good progress in institutionalizing risk mitigation, including through the enactment of the Sri Lanka Disaster Management Act No. 13 of 2005, the establishment of the National Council for Disaster Management, and the creation of a separate Ministry for Disaster Management. There is a need to further strengthen the institutional capacity to identify, assess, and reduce the vulnerability to natural disasters. 47. Climate change itself also poses a risk. At present, two Bank-financed projects are addressing climate change. The Dam Safety and Water Resources Planning Project is helping to upgrade existing hydro-meteorological information systems to enable the country to document and analyze climate changes and have real-time data for forecasting. The Renewable Energy for Rural Economic Development Project which aims to expand the commercial provision and utilization of renewable energy resources has contributed towards the Government’s policy commitment to increase the share of renewable energy generation to 10 percent of total energy generation and to reach household electrification rate of 100 percent by 2015, with 8 percent of households served off-grid. Building on its GEF-supported risk sharing facilities and renewable energy investment, IFC will continue to explore innovative ways to respond to climate change challenges. Expansion of current activities, from renewable energy to energy and resource 14 efficiency, will aim to support climate change mitigation efforts. Direct financing of a wind farm project was committed in FY11. Climate change adaptation activities would focus on opportunities in agriculture by supporting the private seed sector to enhance production, distribution and adoption of high yielding and stress-tolerant seed varieties. 15 Appendix I: Updated CAS FY09-12 Results Matrix (as of 1 June, 2011) Long Term Country Development World Bank CAS Objectives1 Bank Group Activities2 Objectives (as of May 2011) Objective Constraints Indicators to be influenced by the Milestones to track progress Bank STRATEGIC OBJECTIVE 1: EXPANDING ECONOMIC OPPORTUNITIES IN LAGGING REGIONS. INCLUSIVE AND EQUITABLE ECONOMIC DEVELOPMENT CAS Outcome 1.1: Supporting Integrated Rural Development  Halve poverty  Limited access to  40 percent increase in rural  The amount of renewable energy Completed or ongoing : by 2015 markets by rural households electrified by off grid supplied to the national grid from small  Rural Electrification and Renewable Energy entrepreneurs and electrification. (90,000 households and medium generation plants reaching Development Project – renamed Renewable  Increase rural farmers as of 2008) (Achieved: 136,839 105 MW (165.5 MW as of 2011) Energy for Rural Economic Development economic households as of 2011, a 52 percent Project growth  Poor access to  200 kilometers of provincial and rural infrastructure increase)  IFC advisory and investment support for roads rehabilitated (134 km of rural roads (including roads, electric power  Share of rural households with as of 2011. No progress on provincial  Second Community Water Project electricity, water roads as of 2011) supply) and finance access to improved water source  Integrated Community Development – in rural areas reach 74 percent (71 percent as of renamed Second Community Development 2008) (Achieved: 74 percent as of  Number of large dams with high risks to and Livelihood Improvement Project (Gemi  Limited agricultural 2011) public reduced from 32 to 22 (No Diriya) diversification to higher value crops progress as of 2011)  Infrastructure Assessment (AAA)  Share of rural roads (in nine pilot  National and Provincial Road projects – note Pradeshe Sabahs) in ‗good‘ or ‗fair‘  Two basins have fully developed basin  Increasing water that national roads are supported under Road scarcity condition reach 64 percent (47 plans (none as of 2008) (No progress as Sector Assistance Project and its Additional percent as of 2008) (Indicator to of 2011) Financing (New National Roads Project  Damage and be eliminated) proposed in CAS was converted into AF for destruction of crops, Road Sector Assistance Project) property and life due  Share of underweight estate sector to human/elephant children under age 5 reduce to 34.9  Road Sector Second Additional Financing conflicts percent (from 44.1 percent in 2000)  Dam Safety and Water Resources Planning (Indicator to be eliminated) Project  Lagging Regions – renamed Connecting  Increase share of CDD projects that People to Prosperity (AAA) involve functional collaboration  IFC advisory for MSME capacity building in 1 Revisions to indicators and/or targets are explained in the text of the CAS Progress Report. 2 Activities are not exhaustive. 16 Long Term Country Development World Bank CAS Objectives1 Bank Group Activities2 Objectives (as of May 2011) Objective Constraints Indicators to be influenced by the Milestones to track progress Bank across ethnic groups. (Achieved: 5 lagging districts in the South Increase of about 15 percent)  IFC advisory for SME linkages and Business Edge MSME training (incl. in the North)  Establishment of community peace councils (Achieved) Likely in FY12:  Warehouse Receipts Project  IFC advisory for agriculture supply chain linked to John Keels investment Delayed or dropped:3  Irrigation Maintenance and Water Resource Management Project  Community Water and Poverty Alleviation in Plantation Districts Project  Provincial Water Supply Project  Agricultural Research and Productivity Improvement CAS Outcome 1.2: Improving Access to Public Services and Infrastructure in the North and East  Improving  Weak public service  Share of rural population with  15,000 destroyed or damaged houses in Completed or ongoing: economic provision in conflict- access to basic infrastructure North and East rehabilitated (44,944  Puttalam Housing Project opportunities affected areas in facilities in North and East to reach houses reconstructed as of 2011)  Tsunami Emergency Reconstruction Program North and East—for  Community Livelihoods in Conflict Affected in the North 15 percent (9 percent as of 2008) example, education  400 villages received basic infrastructure and East quality, access to (Achieved: 15 percent as of 2011) Areas Project (Reawakening Project) improvements (532 villages completed as  North East Housing Reconstruction Program electricity, water.  Share of destroyed residential of 2011. Additional 217 in process) and Additional Financing  Large infrastructure houses in North and East  Integrated Rural Development – renamed backlog, including rehabilitated to reach 37 percent North East Local Services Improvement residential housing (17.2 percent as of 2011) Project (Baseline corrected: 10 percent as  Provincial Road Project of 2008; Target to be revised: to 18 3 Activities categorized as ―delayed or dropped‖ were listed in the CAS but are not expected to be effe ctive/active by the end of June 2012. High priority activities will be considered in the context of discussions in preparation for the new Country Partnership Strategy, which is expected to take effect July 2012. 17 Long Term Country Development World Bank CAS Objectives1 Bank Group Activities2 Objectives (as of May 2011) Objective Constraints Indicators to be influenced by the Milestones to track progress Bank percent; Achievement expected by  Impact Evaluation of Gama Naguma (TA) end of CAS period)  Emergency Northern Recovery Project  7,600 hectares of land cleared for  100,000 Internally Displaced cultivation (New Milestone: 5,789 Likely in FY12: Persons returned to their place of hectares cleared as of 2011)  Community Livelihoods in Conflict Affected origin. (New Indicator; Achieved: Areas Project Additional Finance (FY11) 187,533 IDPs returned as of 2011) Delayed or dropped:  1, 070,000 person-days of employment generated for  Provincial Water Supply Project returnees. (New Indicator; Achieved: 1,653,000 person-days of employment generated as of 2011)  119,200 hectares cultivated after irrigation rehabilitation. (New Indicator; Achievement expected by end of CAS period: 300 hectares cultivated as of 2011) STRATEGIC OBJECTIVE 1: IMPROVING THE INVESTMENT CLIMATE AND COMPETITIVENESS. ACCELERATE AND SUSTAIN ECONOMIC GROWTH CAS Outcome 2.1: Improving Infrastructure Provision  Reducing the  Significant road  Reduction in International Road  200 kilometers of provincial roads Completed or ongoing: infrastructure maintenance Roughness Index to 8.4 (Average rehabilitated (No progress as of 2011)  Road Sector Assistance Project deficit backlog IRRI for Sri Lanka equal to 9.5 in  Second Community Water Project 2005) (Achieved: Average IRRI for  Key national roads upgraded. (618 km  National and Provincial Road Sector Projects  Create a well-  Inefficient functioning Sri Lanka equal to 6.2 as of 2010) upgraded)  Infrastructure Assessment (AAA) transportation road network  TA for Regulatory Agencies (IDF grant for systems  4 percent decline in Average  Government makes agreed allocations for telecom sector) Network Vehicle Operating Costs national road maintenance to the Road  High transport costs  IFC completed portfolio investment in South (23.8 in 2005) (Achieved: 14.6 in Maintenance Trust Fund (Government has Asia Gateway Terminals (port) 2010, a reduction of 39 percent) increased funding for road maintenance  IFC portfolio investments in Dialog and from $13 million in 2005 to $64 million in Suntel (ICT)  Reduction in road network in poor 2010) or bad condition to 35 percent (52 18 Long Term Country Development World Bank CAS Objectives1 Bank Group Activities2 Objectives (as of May 2011) Objective Constraints Indicators to be influenced by the Milestones to track progress Bank percent in 2005) (38 percent in Likely in FY12: 2010. Target to be revised: 37  Metro Colombo Integrated Urban percent by end of CAS period) Development Project CAS Outcome 2.2: Improving the Business Environment for Stronger Entrepreneurship and a Knowledge-Based Economy  Establish a  Limited  Share of commercial lending for  Adequate corporate governance Completed or ongoing: vibrant SME development of SMEs from Bank increased by 10 regulations for the banking sector adopted.  SME Development Facility Project business sector capital markets, percent. (Achieved: Share of (Mandatory Corporate Governance Code  IFC GTFP support for SMEs especially for SMEs commercial lending for SMEs has was issued by the Central Bank of Sri  IFC investment and advisory for MSME  Increase increased by 15 percent in 2011.) Lanka in 2008.) finance investments  Cumbersome  IFC Dialog investment capacity building for and inflow of judicial procedures  20 e-government services MSMEs via SME Toolkit and ICT FDI established and used by private  IFC advisory on Corporate Governance in the  Limited access to sector (Baseline corrected: zero as Financial and Corporate sectors and high cost of IT of 2008) (Achieved: 112 as of services  IFC advisory for Secured Collateral Registry 2011) and Payment System  Time to start up a business reduced  Transition to IAS32, IAS39 and IFRS7 (TA by 25 percent (70 days as of 2008) funded by FIRST) (Achieved: 35 days as of 2011, a 50  Amending SEC Act to enable percent reduction) demutualization of Colombo Stock Exchange (TA funded by FIRST)  Insurance Supervision support (TA funded by FIRST)  E-Sri Lanka Project  Private Sector Development in Tourism Resources Project – renamed Sustainable Tourism Development Project  IFC advisory for sustainable tourism (incl. supplier MSME capacity building)  IFC-WB support to Doing Business reform (TA)  IFC portfolio investment in John Keels  IFC advisory for investment climate reforms 19 Long Term Country Development World Bank CAS Objectives1 Bank Group Activities2 Objectives (as of May 2011) Objective Constraints Indicators to be influenced by the Milestones to track progress Bank in selected municipalities  Growth, Outsourcing and Jobs (AAA) – refocused  IFC investment support for banks Likely in FY12:  Investment Climate Survey (with ADB)  IFC possible investments in microfinance and equity funds supporting SMEs  IFC advisory program for MSMEs via investment linkages and Business Edge  IFC Access to Finance AS (risk management, MSME finance, agri-finance insurance) CAS Outcome 2.3: Improving the Strategic Relevance and Transparency of Public Spending  Strengthen  Policy uncertainty,  Share of budget expenditures  Share of budget expenditures classified Completed or ongoing: macro- including reversals classified as ‗other‘ in the MTEF as ‗other‘ in the MTBF reduced to 10  Public Sector Capacity Building Project economic reduced to 5 percent (30 percent in percent. (As of 2011, no budget  IDF Grant for COPE/COPA management  Persistent high fiscal 2006) (Achieved: As of 2011, no expenditures are categorized as ‗other‘)  Debt Management (TA) deficit and inflation budget expenditures are categorized  Infrastructure Assessment (AAA) [Public sector deficit reduced as ‗other‘)  Quasi-fiscal losses of SOEs reduced to 1 Delayed or dropped: to 5 percent of percent of GDP. (Milestone to be GDP (7.7  Quasi-fiscal losses of SOEs reduced  Public Spending and Services (TA) eliminated) percent as of to less than 0.5 percent of GDP (2  Promoting policy change in State-Owned 2008); percent in 2006) (Target to be  Framework for PPPs established. Enterprise (AAA) eliminated) (Milestone to be eliminated)  Public Financial Management Assessment public debt (AAA) reduced to 70  Improved public procurement, percent (85  Professional secretariat for COPE and  Public Private Partnership Framework (TA) public financial management and percent today); COPA established. (As of 2011,  WBI program to strengthen budget parliamentary oversight over public committees exist and have been trained) preparation and planning in Provincial spending (Progressing) Inflation Councils reduced to 5  Effective procurement monitoring percent (24 system established. (The National percent as of Procurement Agency was disbanded. 20 Long Term Country Development World Bank CAS Objectives1 Bank Group Activities2 Objectives (as of May 2011) Objective Constraints Indicators to be influenced by the Milestones to track progress Bank 2008)] However, the new Project Implementation Unit at the Ministry of Finance and Planning is tracking . procurement. Milestone to be eliminated)  Establishment of a contractor/supplier registration system. (Contractor registration system is in place. Supplier registration system was established in 2009 but later eliminated) STRATEGIC OBJECTIVE 3: IMPROVING THE QUALITY OF SERVICES AND ACCOUNTABILITY. PROVISION OF HIGH QUALITY, RELEVANT AND COST EFFECTIVE PUBLIC SERVICES, INCLUDING IN CONFLICT-AFFECTED AREAS CAS Outcome 3.1: Improving Quality, Relevance and Governance of Education  Increase  Low organizational  School survival rates through grade  School attendance committees active in Completed or ongoing: access, and managerial 9 increased from 79 percent to 85 at least 80 percent of zones (School  Education Sector Development Project attendance committees active in 100 enhance capacity at national percent (Achieved: 90 percent in  Increasing Relevance and Quality of percent of zones as of 2011) quality and and provincial levels 2010) Undergraduate Education Project improve of the education  Higher Education for the 21st Century Project governance of system.  Proportion of primary school  Teacher training programs on the  Impact evaluation of school based basic and students attaining competence in modernized primary curriculum management (TA)  Lack of mathematics increased from 67 introduced in all zones (Achieved) secondary  Higher Education Study (AAA) education accountability to percent t o 71 percent (Achieved: students and parents 79 percent in 2010) Likely in FY12:  Sufficient  Number of zones in which school based  General Education Project – renamed supply of  Outdated curriculum  School based management increased management is established to reach at and low teacher from 16 zones (17 percent of zones) Transforming School Education as the highly skilled least 37 (baseline 16 zones) (School skills to at least 46 zones (50 percent of based management established in 100 Foundation for a Knowledge Hub Project and productive zones). (Achieved: 62 zones as of percent of zones as of 2011)  IFC investment for private education people in  Low enrolment and 2011, a 66 percent increase.) demand by poor quality of 21 Long Term Country Development World Bank CAS Objectives1 Bank Group Activities2 Objectives (as of May 2011) Objective Constraints Indicators to be influenced by the Milestones to track progress Bank employers higher education  Higher education development  Draft higher education development strategy completed and notified. strategy presented for stakeholder (Achieved) consultations (Achieved)  IT achievement scores of  IT learning programs implemented in undergraduates rise from 49 percent all universities (Achieved) to 60 percent (Target to be revised: to 56 percent, following target  English language improvement realism review. Achieved: 56 programs implemented in all percent as of 2011) universities (Achieved)  English language achievement  Multi-ethnic and multicultural scores of undergraduates rise from curriculum review committees 59 percent (as of 2005) to 67 percent functioning for civics, history and (Achieved: 69 percent as of 2011) English (Achieved)  Promote a multi-ethnic and multicultural society through the school curriculum. (Achieved: School curriculum promotes bilingual education and includes civics as a subject, in 2011) CAS Outcome 3.2: Improving Health and Social Protection Services  Reduce  Inadequate non-  Percentage of districts with MMR of  National Action Plan for prevention of Completed or ongoing: incidence of communicable 46.9/100,000 or lower equal to 80 NCDs which includes a national  Health Sector Development Project and non- diseases prevention percent (Achieved: 77 percent of surveillance system is finalized Additional Financing communicable system. districts, based on most recently (Achieved)  National HIV/AIDS Project diseases. available data as of 2011)  Health Delivery System Review and Non-  Inefficient hospital  Number of districts which use logical Communicable Diseases Strategy (AAA)  Lower network  Number of women more than 35 framework and report regularly—once  Study on Private Sector in Health (AAA) incidence of years screened for cervical cancer a year—on performance increased to 75  IFC portfolio and new investments in malnutrition,  High exclusion of increased by 25 percent (57,639 percent (in 2006 it was equal to 26.9 hospitals eligible poor in cash screened in 2007) (Achieved: percent (7/26)) (85 percent of districts  IDF to improve targeting and administration 22 Long Term Country Development World Bank CAS Objectives1 Bank Group Activities2 Objectives (as of May 2011) Objective Constraints Indicators to be influenced by the Milestones to track progress Bank  Lower disease transfer programs; 122,130 women screened, an as of 2008 and 100 percent of districts of Samurdhi burden for the no exit procedure increase of 112 percent, based on as of 2010)  Towards a Social Protection system for the poor. from cash transfer most recently available data as of poor (programmatic TA) programs 2011)  Samurdhi Management Information  Income Support to Disabled and Elderly  Improve System improved—providing timely Project (Global Food Crisis Rapid Response effectiveness  Weak linkages  Coverage of HH receiving Samurdhi data on coverage (Samurdhi MIS Program) and targeting between safety net benefits reduced from 47 percent to improvement is ongoing under an IDF  JSDF Proposal Development Fund of the social programs and the 40 percent while the share of funded activity)  Post Disaster Safety Net Project. (Global protection labor market Samurdhi beneficiaries in the East Food Crisis Rapid Response Program) system increases from 11.7 percent to 15  Information about insurance products for the unorganized sector improved  Implementation and evaluation of Samurdhi percent, and in the North from 3.5 (Milestone to be eliminated) targeting (TA) percent to 5 percent (Achievement  Demographic transition (AAA) expected by end of CAS period. 35  Employment Promotion and Creation percent of HH receive benefits, with Program evaluated and results reflected Dropped or delayed: 13.2 percent of beneficiaries in the in program design (Achieved)  Second Health Sector Development Project East and 4.1 percent in the North, (likely in FY13) based on most recently available  Existing social care centers used as data as of 2011)  Female migration (AAA) planned (Achieved)  Post-disaster cash payments (TA)  30 percent increase in the coverage of the Employment Promotion and Creation Program (baseline 3.000 per year) (Achieved: 90,000 as of 2011)  30 percent increase in social care centers for vulnerable groups (baseline 27 centers in 2008) (Achieved: 44 centers in 2011, an increase of 63 percent) CAS Outcome 3.3: Strengthening Environmental Protection  Environmental  Weak  25 percent reduction in time for  Streamlining the EIA and EPL processes Completed or ongoing: ly sustainable implementation of processing environmental approvals to reduce approval times and GOSL  Sri Lanka Country Environmental Analysis – approval (A World Bank study on EIA 23 Long Term Country Development World Bank CAS Objectives1 Bank Group Activities2 Objectives (as of May 2011) Objective Constraints Indicators to be influenced by the Milestones to track progress Bank development existing legislation (180 days today for EIAs and 45 including recommendations for Natural Resources, Environment and days for EPLs) (No progress as of streamlining processes is being reviewed Development (AAA)  Incoherent use and 2011. Target to be revised: to 15 by GOSL)  Environmental impacts of coal power application of percent reduction in time) generation (AAA) - refocused Environmental  Cabinet approval and guidelines prepared  IFC advisory for energy efficiency in the tea Impact Assessments  20 percent of GOSL policies and for SEA. (Achieved) industry programs will be subject to Strategic Environmental Assessments (none  Implementation of Visitor Services Plans  IFC investment and advisory for sustainable today) (Achieved: 20 percent as of in five Protected Areas (none as of 2008) energy projects via PADGO (Portfolio 2011) (Milestone to be eliminated) Approach to Distributed Generation Opportunity) risk sharing facilities and direct  40 percent increase in international  Pilot programs with community support. tourist visitation to protected areas participation to reducing the and forest reserves (Currently human/elephant conflict implemented in Delayed or dropped: 50,000 international tourists per at least 2 sites (none as of 2008)  Environment Resource Management Project – annum) (Target to be eliminated) (Milestone to be eliminated) renamed Ecosystems Conservation and  Reducing the human/elephant Management Project Initiation of installation of 500 km of conflict; annual number of human electric fencing and other barriers to deaths from wild elephants reduced prevent elephant incursions into inhabited by 25 percent (75 deaths in 2006); areas (600 km of fencing as of 2008) number of wild elephants killed (Milestone to be eliminated) reduced by 25 percent (160 killed in 2006) (Target to be eliminated) 24 Appendix II: IDA/IBRD Lending Program FY09-12: Planned vs. Actual Fiscal CAS Planned Project Planned Status Approved Year Amount Amount (US$m) (US$m) FY09  Integrated Community Development – 75 Approved in FY10 0 Gama Naguma/Lagging Regions (renamed Second Community Development and Livelihood Improvement Project)  Provincial Road (East and Sabagaragamuwa) Development (renamed 150 Approved in FY10 0 Provincial Road Project) Additional Actual Projects  Health Sector Development 24 Additional Financing  Road Sector Assistance 98.1 Project – Additional Finance (programmed for FY08; approved FY09) TOTAL FY09 122.1 FY10  Integrated Rural Development— Gama 50 Actual 50 Naguma/ Lagging Regions for East (renamed North & East Local Services Improvement Project)  Higher Education 40 Actual 40  Environmental Resource Management 20 Dropped 0 (renamed Ecosystems Conservation and Management Project)  Private Sector Development in Tourism 15 Actual 18 Resources (renamed Sustainable Tourism Development project)  National and Provincial (Western and Uva) 115 Dropped 0 Road Development (AF for Road Sector Assistance Project, FY09 ongoing)  Second Community Development and Shifted from FY09 75 Livelihood Improvement Project  Provincial Road Project Shifted from FY09 105 Additional Actual Projects  Emergency Northern 65 Recovery Project  Community Livelihoods in 12 Conflict Affected Areas – Additional Finance TOTAL FY10 365 FY11  National and Provincial (North Central and 100 Dropped 0 North Western) Road Development (converted into 2nd AF for Road Sector Assistance Project, FY11)  Irrigation Maintenance and Water 50 Dropped 0  Community Water Supply & Poverty 40 Dropped 0 Alleviation in Plantation Districts  Agriculture Research and Productivity 35 Dropped 0 Improvements (renamed Agricultural 25 Competitiveness Project) Additional Actual Projects  SME Development Facility 57.4 Project  Road Sector Assistance 100 Project – 2nd Additional Finance  Community Livelihoods in 38* Conflict Affected Areas – 2nd Additional Finance (flood response)* * Bank approval expected 6/2/2011 TOTAL FY11* 195.4 FY12  General Education 50 Actual 100** (renamed Transforming School Education as the Foundation for a Knowledge Hub)  Health Sector Development 35 Slipped to FY13 0  Water Supply in the Northern Easter and 75 Dropped 0 Sabaragamuwa Province  National and Provincial (North Central and 50 Dropped 0 Northern Road Development) (converted into 2nd AF for Road Sector Assistance Project, FY11) Additional Actual Projects  Metro Colombo Integrated 150** Urban Development Project (IDA/IBRD) **indicative TOTAL FY12** 250 26 Appendix III: Sri Lanka Trust Fund Activities FY09-12  ( Figures in thousands of USD ) Grant Trust Fund Net Grant Grant Sign Grant Trust Fund Name Closing Exec. By # Amount Date Curr. Date Projects Closed/Closing during CAS Period COMMUNITY PEACE COUNCILS /DESHODAYA TF090122 FORUMS FOR SRI LANKA 230.11 1/31/2011 5/4/2007 USD Recipient TF058231 STUDY OF POLITICS OF STATE REFORM 153.77 2/23/2011 1/28/2009 USD Recipient SRI LANKA DEVELOPMENT PARTNERS TF054366 COORDINATION AND SUPPORT FUND 1,703.38 3/31/2011 11/25/2004 USD Bank AHI - SRILANKA - AVIAN INFLUENZA TF091200 PREPAREDNESS AND RESPONSE PROJECT 1,433.00 3/31/2011 3/7/2008 USD Recipient SUPPORTING DIALOG AND STRENGTHENING ADVOCACY FOR DECENTRALIZATION REFORMS IN TF094005 SRI LANKA 50.00 4/15/2011 4/1/2009 USD Bank INCLUSIVE GROWTH IN SRI LANKA: A DISTRICT TF095401 LEVEL APPROACH 57.25 4/30/2011 10/15/2009 USD Bank UNRAVELING THE CONSTRAINTS TO GROWTH AND TF096611 INNOVATION AMONG POOR BUSINESS OWNERS 65.00 4/30/2011 4/1/2010 USD Bank SRI LANKA - TECHNICAL STUDY ON WATER AND SANITATION SERVICES DELIVERY IN THE TF094741 PLANTATION ESTATE 93.19 5/31/2011 9/15/2009 USD Bank SRI LANKA: PDNA TECHNICAL ASSISTANCE TF097133 (GFDRR: TRACK III TA - TASK) 75.00 6/9/2011 6/6/2010 USD Bank GEF2-SRILANKA:RENEWABLE ENERGY FOR RURAL TF051248 ECONOMIC DEVELOPMENT 8,000.00 6/30/2011 7/12/2002 USD Recipient SRI LANKA: COMMUNITY WATER SUPPLY AND SANITATION PROJECT - TECHNICAL AUDIT AND TF093001 BENEFICIARY ASSESSMENT 300.00 6/30/2011 9/17/2008 USD Bank TF093604 SRI LANKA INFRASTRUCTURE ASSESSMENT 300.00 6/30/2011 1/5/2009 USD Bank STRATEGIC DEVELOPMENT FRAMEWORK FOR THE TF094599 EASTERN PROVINCE OF SRI LANKA 300.00 6/30/2011 6/22/2009 USD Bank TF096696 TRADE AND LOGISTICS IN SRI LANKA 130.00 6/30/2011 3/15/2010 USD Bank PPIAF - SRI LANKA: FACILITATING PPPs FOR TF097198 INFRASTRUCTURE DEVELOPMENT 290.00 6/30/2011 6/15/2010 USD Bank ASSESSEMENT OF STATUS OF DEGRADATION OF TF098477 THE SIGIRIYA FRESCOES, SRI LANKA 20.00 6/30/2011 10/15/2010 USD Bank GPOBA (W3 PREP): SRI LANKA ACCESS TO TF099226 SANITATION PROJECT 45.00 6/30/2011 3/8/2011 USD Bank IDF - SRILANKA: STRENGTHENING TF092313 PARLIAMENTARY OVERSIGHT COMMITTEES 494.00 7/14/2011 7/14/2008 USD Recipient SRI LANKA: DISASTER REDUCTION AND RECOVERY TF092405 (GFDRR TRACK II-TA) NON-CORE 200.00 9/30/2011 6/26/2008 USD Bank FIRST: SRI LANKA # 8082 RISK SENSITIVE TF094829 CAPITAL RULE FOR INSURANCE SUPERVISION 245.70 9/30/2011 7/22/2009 USD Bank ACCOUNTABILITY FRAMEWORK FOR SOCIAL AUDITS BY WOMEN IN LOCAL GOVERNMENTS IN TF098408 SRI LANKA 50.00 11/30/2011 11/22/2010 USD Bank SRI LANKA - AUSTRALIA CO-TF FOR EMERGENCY TF096422 NORTHERN RECOVERY PROJECT (CHILD FUND) 10,539.07 12/31/2011 8/13/2010 USD Recipient IMPROVING WOMEN'S ACCESS TO LIVELIHOOD OPPORTUNITIES AND LOCAL SERVICES IN THE TF097508 POST-CONFLICT CONTEXT OF SRI LANKA 50.00 12/31/2011 6/14/2010 USD Bank TF098529 PHRD STAFF GRANT SUPPORT FOR MARI SHOJO 93.60 12/31/2011 1/1/2011 USD Bank ACCESS TO FINANCE & BUSINESS DEVELOPMENT TF091269 SERVICES TO SMES IN THE SOUTHERN PROVINCE 2,500.00 2/28/2012 12/6/2007 USD Bank IDF- SRI LANKA: INFORMATION AND COMMUNICATIONS TECHNOLOGY REGULATORY TF094299 CAPACITY BUILDING PROJECT 472.63 6/16/2012 6/16/2009 USD Recipient SRI LANKA HEALTH RESULTS-BASED FINANCING TF098723 DEIGN 250.00 6/30/2012 1/1/2011 USD Bank PRE-FEASIBILITY STUDY FOR THE REGENERATION TF099215 OF HISTORIC AREAS OF COLOMBO 50.00 6/30/2012 3/7/2011 USD Bank 27 Active/New Projects IMPROVING MONITORING AND EVALUATION OF TF094313 SAMURDHI SAFETY NET PROGRAM 450.00 7/10/2012 7/10/2009 USD Recipient STRENGTHENING THE TARGETING OF SAFETY NETS TF097300 IN SRI LANKA 200.00 9/14/2012 6/1/2010 USD Bank AGRICULTURE FINANCE SUPPORT FACILITY - TF097082 HATTON NATIONAL BANK 50.00 12/31/2012 6/1/2010 USD Bank BANK PREPARATION, SUPERVISION AND ICR FOR TF098012 WAREHOUSE RECEIPTS PROJECT 400.00 3/31/2013 10/6/2010 USD Bank TF097195 OLC MICRO FINANCE LIMITED (LOMF) 450.00 6/14/2013 6/10/2010 USD Bank TF097196 SANASA 400.00 6/14/2013 6/10/2010 USD Bank PREPARATION AND SUPERVISION FOR INCOME SUPPORT FOR THE ELDERLY AND DISABLED PILOT TF098602 PROJECT 318.22 12/31/2013 12/23/2010 USD Bank IFC SOUTH ASIA ENTERPRISE DEVELOPMENT TF094700 FACILITY- SRI LANKA TRUST FUND 1,636.00 6/30/2014 7/1/2009 USD Bank ROUND 1: SRI LANKA-LOCAL LEVEL NUTRITION TF097171 INTERVENTIONS FOR THE NORTHERN PROVINCE 2,731.70 1/31/2015 1/31/2011 USD Recipient ROUND 1: SRI LANKA-SUPERVISION-LOCAL LEVEL LEVEL NUTRITION INTERVENTIONS FOR THE TF097172 NORTHERN PROVINCE 214.96 1/31/2015 1/31/2011 USD Bank DISTRIBUTED GENERATION OPPORTUNITY (PADGO) (PHASE 1)-TECHNICAL ASSISTANCE & TF091764 KM/M&E 600.00 2/28/2015 3/7/2008 USD Bank DISTRIBUTED GENERATION OPPORTUNITY (PADGO) (PHASE 1)- RISK SHARING FACILITY TF091765 RESERVES 3,000.00 2/28/2015 3/7/2008 USD Bank Total 42,175.21 28 Appendix IV: Statement of IFC's Committed and Outstanding Portfolio Amounts in US Dollar Millions Accounting Date as of: 04/30/2011 Committed Outstanding Commitment IFC Participant IFC Participant FY Institution Loan Equity Quasi-Equity Guarantee Risk Mgmt All Loan Loan Equity Quasi-Equity Guarantee Risk Mgmt All Loan Asiri 20.0 0.0 0.0 0.0 0.0 20.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2010 Hospital 2003/2004/ Commercial 0.0 13.0 0.0 5.4 0.0 18.4 0.0 0.0 13.0 0.0 5.4 0.0 18.4 0.0 2007/2008/ Bank of 2009/2010/ Ceylon 2011 Commercial 0.0 0.0 0.0 14.4 0.0 14.4 0.0 0.0 0.0 0.0 5.0 0.0 5.0 0.0 Bank of Ceylon Sri 2009 Lanka 2004 Dialog 0.0 2.7 0.0 0.0 0.0 2.7 0.0 0.0 2.7 0.0 0.0 0.0 2.7 0.0 Fitch 0.0 0.1 0.0 0.0 0.0 0.1 0.0 0.0 0.1 0.0 0.0 0.0 0.1 0.0 2000 Srilanka GTFP 0.0 0.0 0.0 1.6 0.0 1.6 0.0 0.0 0.0 0.0 1.6 0.0 1.6 0.0 2011 Union Bank John Keells 60.0 0.0 0.0 0.0 0.0 60.0 0.0 60.0 0.0 0.0 0.0 0.0 60.0 0.0 2008 Hold 2001/2002/ Lanka 0.0 0.0 0.0 0.1 0.0 0.1 0.0 0.0 0.0 0.0 0.1 0.0 0.1 0.0 2009 Hospitals 2007/2009/ NDB 0.0 0.0 0.0 13.1 0.0 13.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2010/2011 SriLanka 2008/2009/ NTB 0.0 0.0 0.0 0.1 0.0 0.1 0.0 0.0 0.0 0.0 0.1 0.0 0.1 0.0 2010 SriLanka 2001 Suntel 0.0 1.4 0.0 0.0 0.0 1.4 0.0 0.0 1.4 0.0 0.0 0.0 1.4 0.0 Total Portfolio 80.0 17.2 0.0 34.7 0.0 131.8 0.0 60.0 17.2 0.0 12.2 0.0 89.3 0.0 29 Annex A2: Sri Lanka at a glance 2/25/11 Lower- POVERTY and SOCIAL Sri South middle- Development diamond* Lanka Asia income 2009 Population, mid-year (millions) 20.3 1,568 3,811 Life expectancy GNI per capita (Atlas method, US$) 1,990 1,082 2,316 GNI (Atlas method, US$ billions) 40.4 1,697 8,825 Average annual growth, 2003-09 Population (%) 1.0 1.5 1.2 GNI Gross Labor force (%) 0.6 2.2 1.5 per primary Most recent estimate (latest year available, 2003-09) capita enrollment Poverty (% of population below national poverty line) .. .. .. Urban population (% of total population) 15 30 41 Life expectancy at birth (years) 74 64 68 Infant mortality (per 1,000 live births) 13 55 43 Child malnutrition (% of children under 5) 21 41 25 Access to improved water source Access to an improved water source (% of population) 90 87 87 Literacy (% of population age 15+) 91 61 80 Sri Lanka Gross primary enrollment (% of school-age population) 101 108 107 Male 101 110 109 Lower-middle-income group Female 102 105 105 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1989 1999 2008 2009 Economic ratios* GDP (US$ billions) 7.0 15.7 40.7 42.0 Gross capital formation/GDP 21.7 27.3 27.6 24.5 Trade Exports of goods and services/GDP 27.3 35.5 24.8 21.4 Gross domestic savings/GDP 12.2 19.5 13.9 18.0 Gross national savings/GDP 18.9 23.5 14.8 20.2 Current account balance/GDP -5.2 -3.6 -9.5 -0.5 Domestic Capital Interest payments/GDP 2.2 1.4 0.9 0.8 savings formation Total debt/GDP 74.2 62.6 38.3 41.0 Total debt service/exports 18.2 11.1 9.3 10.1 Present value of debt/GDP .. .. .. 31.6 Present value of debt/exports .. .. .. 94.5 Indebtedness 1989-99 1999-09 2008 2009 2009-13 (average annual growth) GDP 5.3 5.3 6.0 3.5 7.2 Sri Lanka GDP per capita 4.3 4.3 5.2 2.8 .. Lower-middle-income group Exports of goods and services 7.4 .. .. .. .. STRUCTURE of the ECONOMY 1989 1999 2008 2009 Growth of capital and GDP (%) (% of GDP) 10 Agriculture 25.6 20.7 13.4 12.6 8 Industry 26.8 27.3 29.4 29.7 6 Manufacturing 15.3 16.4 18.0 18.1 4 Services 47.6 52.0 57.2 57.7 2 0 Household final consumption expenditure 77.3 71.5 70.0 64.3 04 05 06 07 08 09 General gov't final consumption expenditure 10.5 9.0 16.2 17.6 GCF GDP Imports of goods and services 36.8 43.3 38.5 27.9 1989-99 1999-09 2008 2009 (average annual growth) Agriculture 2.0 2.4 7.5 3.2 Industry 7.0 5.2 5.9 4.2 Manufacturing 8.3 4.3 4.9 3.3 Services 5.7 6.0 5.6 3.3 Household final consumption expenditure 4.9 .. .. .. General gov't final consumption expenditure 20.1 .. .. .. Gross capital formation 6.4 .. .. .. Imports of goods and services 8.4 .. .. .. Note: 2009 data are preliminary estimates. This table was produced from the Development Economics LDB database. * The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete. 30 Sri Lanka PRICES and GOVERNMENT FINANCE 1989 1999 2008 2009 Inflation (%) Domestic prices 25 (% change) 20 Consumer prices 11.6 4.7 22.6 3.4 15 Implicit GDP deflator 10.9 4.2 16.3 5.7 10 Government finance 5 (% of GDP, includes current grants) 0 Current revenue 24.0 18.4 15.6 15.1 04 05 06 07 08 09 Current budget balance 1.4 -0.4 -1.3 -3.1 GDP deflator CPI Overall surplus/deficit -8.6 -6.9 -7.0 -9.8 TRADE 1989 1999 2008 2009 Export and import levels (US$ mill.) (US$ millions) Total exports (fob) 1,558 4,610 8,111 7,085 15,000 Tea 379 620 1,272 1,185 Other agricultural goods and unclassified expo 86 374 583 505 10,000 Manufactures 490 2,425 3,469 3,274 Total imports (cif) 2,282 5,979 14,091 10,207 Food .. 661 1,138 987 5,000 Fuel and energy .. 500 3,368 2,167 Capital goods .. 1,565 3,048 2,451 0 03 04 05 06 07 08 09 Export price index (2000=100) 16 92 140 138 Import price index (2000=100) 26 86 153 155 Exports Imports Terms of trade (2000=100) 64 107 91 89 BALANCE of PAYMENTS 1989 1999 2008 2009 Current account balance to GDP (%) (US$ millions) Exports of goods and services 1,904 5,578 10,115 8,977 0 Imports of goods and services 2,621 6,799 15,694 11,708 -2 03 04 05 06 07 08 09 Resource balance -717 -1,221 -5,579 -2,731 -4 Net income -163 -254 -972 -487 -6 Net current transfers 519 913 2,666 3,004 -8 Current account balance -360 -562 -3,885 -214 -10 Financing items (net) 396 299 2,778 3,491 -12 Changes in net reserves -36 263 1,107 -3,277 Memo: Reserves including gold (US$ millions) 254 1,639 5,467 5,578 Conversion rate (DEC, local/US$) 36.1 70.6 108.3 114.9 EXTERNAL DEBT and RESOURCE FLOWS 1989 1999 2008 2009 Composition of 2009 debt (US$ mill.) (US$ millions) Total debt outstanding and disbursed 5,181 9,800 15,611 17,208 IBRD 82 20 0 0 1873 2487 IDA 702 1,651 2,381 2,487 Total debt service 422 757 1,231 1,418 721 IBRD 12 8 0 0 2685 IDA 7 27 74 73 Composition of net resource flows Official grants 195 112 520 497 3388 Official creditors 298 151 268 603 Private creditors -48 -83 163 638 Foreign direct investment (net inflows) 20 176 752 404 Portfolio equity (net inflows) 0 0 -488 -382 6054 World Bank program Commitments 20 56 279 99 Disbursements 59 49 95 147 Principal repayments 6 21 55 56 Net flows 53 28 40 91 Interest payments 12 14 19 17 Net transfers 41 14 21 74 Note: This table was produced from the Development Economics LDB database. 2/25/11 31 Annex B2 Selected Indicators* of Bank Portfolio Performance and Management As of 4/11/2011 Indicator 2008 2009 2010 2011 Portfolio Assessment Number of Projects Under Implementation a 14 13 16 16 Average Implementation Period (years) b 3.7 4.8 3.7 3.5 Percent of Problem Projects by Number a, c 0.0 7.7 6.3 6.3 Percent of Problem Projects by Amount a, c 0.0 3.3 2.7 2.8 Percent of Projects at Risk by Number a, d 7.1 7.7 6.3 6.3 Percent of Projects at Risk by Amount a, d 8.2 3.3 2.7 2.8 Disbursement Ratio (%) e 25.3 24.6 48.3 25.3 Portfolio Management CPPR during the year (yes/no) Supervision Resources (total US$) Average Supervision (US$/project) Memorandum Item Since FY 80 Last Five FYs Proj Eval by OED by Number 80 6 Proj Eval by OED by Amt (US$ millions) 2,239.5 170.0 % of OED Projects Rated U or HU by Number 32.5 83.3 % of OED Projects Rated U or HU by Amt 36.5 59.3 a.As shown in the Annual Report on Portfolio Performance (except for current FY). b.Average age of projects in the Bank's country portfolio. c.Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d.As defined under the Portfolio Improvement Program. e.Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year: Investment projects only. * All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year. 32 Annex B3: IFC Investment Operations Program 2008 2009 2010 2011* Original Commitments (US$m) IFC and Participants 175.14 37.87 67.87 15.92 IFC's Own Accounts only 175.14 37.87 67.87 15.92 Original Commitments by Sector (%)- IFC Accounts only ACCOMMODATION & TOURISM SERVICES 42.82 ELECTRIC POWER 18.62 FINANCE & INSURANCE 0.08 100 51.92 100 HEALTH CARE 29.47 INFORMATION 57.1 Total 100 100 100.01 100 Original Commitments by Investment Instrument (%) - IFC Accounts only Equity 17.13 Guarantee 0.08 100 70.53 100 Loan 82.79 29.47 Total 100 100 100 100 * Data as of April 01, 2011 33 Annex B4: Summary of Nonlending Services FY09-12 As of 4/11/2011 , Completion Cost a Product* ** Audience FY (US$000) Programmatic Area: Supporting the Mahinda Chintana goal of doubling per capita income / sustained economic growth Recent completions Growth Potential in Lagging Regions 2009 571.7 Government Cost of No Reform 2009 78.2 Government Inclusive Financial Services for N&E** 2011 50.5 Government Environmentally Sustainable Power Development 2010 1.8 Government Knowledge Economy Report** 2010 85.9 Government Towers of Learning: Higher Education Report 2009 287.1 Government Nature-Based Tourism & Human Elephant Conflict 2010 256.8 Government Valuation of Environmental Services 2010 17.2 Government Underway 2020 Raising the Game: Middle Income Age 2012 283.6 Government Post FSAP, Crisis Management, Financial Safety Net & Lender of Last Resort** 2012 208.6 Government Support for Post-Crisis PPP framework development in Sri Lanka** 2012 0 Government Government Debt Management** 2011 63.5 Government Competitive Skills for a MIC* 2012 130.6 Government Infrastructure Assessment 2011 274.5 Government Strategic Development Framework Eastern Province** 2012 27.6 Government Pre-feasibility assessment of the conditions of degradation of the Sigiriya Frescoes in Sri Lanka** 2011 0 How-to-Guidance Supporting the Mahinda Chintana goal of a high quality of life for all its people/ public service provision in the middle income country context Recent completions Lagging Regions Phase 2 2010 347.6 Government Health Services Delivery 2010 85.7 Government Social Protection TA 2010 299.5 Government Underway Excellence in General Education* 2011 56.2 Government Private Health Sector Assessment*  2012 20.7 Other Strengthening Samurdhi Targeting Systems** 2012 23.2 Government Demographic Transition Study* 2012 78.3 Public Post Disaster Needs Assessment** 2012 0 Government Disaster Reduction and Recovery in Sri Lanka** 2012 83.7 Government Environmental Assessment System 2011 22.7 Government Implementing the Sri Lanka Conflict Filter** 2011 121.4 Other Sri Lanka Development Partners Coordination** 2011 127 Donor * AAA not foreseen in FY09-12 CAS. ** TA not foreseen in FY09-12 CAS. a. Government, donor, Bank, public dissemination. b. Knowledge generation, public debate, problem-solving. 34 Annex B5: Social Indicators Latest single year Same region/income group Lower- South middle- 1980-85 1990-95 2002-08 Asia income POPULATION Total population, mid-year (millions) 16.0 18.1 20.2 1,545.1 3,703.0 Growth rate (% annual average for period) 1.4 1.1 1.1 1.5 1.2 Urban population (% of population) 18.0 16.4 15.1 29.5 41.3 Total fertility rate (births per woman) 2.9 2.3 2.3 2.9 2.5 POVERTY (% of population) National headcount index .. 20.0 22.7 .. .. Urban headcount index .. 15.0 24.7 .. .. Rural headcount index .. 22.0 7.9 .. .. INCOME GNI per capita (US$) 370 700 1,780 963 2,073 Consumer price index (2000=100) 14 41 156 127 126 Food price index (2000=100) 21 63 135 .. .. INCOME/CONSUMPTION DISTRIBUTION Gini index 32.5 32.5 41.1 .. .. Lowest quintile (% of income or consumption) 8.2 8.7 6.8 .. .. Highest quintile (% of income or consumption) 40.9 41.5 48.0 .. .. SOCIAL INDICATORS Public expenditure Health (% of GDP) .. .. 2.0 1.1 1.8 Education (% of GDP) 2.6 3.0 .. 2.9 4.0 Net primary school enrollment rate (% of age group) Total .. 83 100 86 87 Male .. 85 100 88 89 Female .. 81 100 84 86 Access to an improved water source (% of population) Total .. 71 82 87 86 Urban .. 93 98 94 94 Rural .. 67 79 84 81 Immunization rate (% of children ages 12-23 months) Measles 20 87 98 75 81 DPT 70 93 98 71 79 Child malnutrition (% under 5 years) .. .. 21 41 25 Life expectancy at birth (years) Total 69 70 74 64 68 Male 66 66 70 63 66 Female 72 73 78 65 70 Mortality Infant (per 1,000 live births) 27 21 13 58 45 Under 5 (per 1,000) 34 25 15 76 64 Adult (15-59) Male (per 1,000 population) 200 182 196 246 204 Female (per 1,000 population) 152 122 77 173 138 Maternal (modeled, per 100,000 live births) .. .. 58 500 370 Births attended by skilled health staff (%) .. 94 99 42 65 Note: 0 or 0.0 means zero or less than half the unit shown. Net enrollment rate: break in series between 1997 and 1998 due to change from ISCED76 to ISCED97. Immunization: refers to children ages 12-23 months who received vaccinations before one year of age or at any time before the survey. World Development Indicators database, World Bank - 23 April 2010. 35 Annex B6: Key Economic Indicators Actual Estimate Projected Indicator 2006 2007 2008 2009 2010 2011 2012 2013 2014 National accounts (as % of GDP) Gross domestic producta 100 100 100 100 100 100 100 100 100 Agriculture 11 12 13 13 13 13 13 14 14 Industry 31 30 29 30 29 29 29 28 28 Services 58 58 57 58 58 58 58 58 58 Total Consumption 83 82 86 82 81 80 77 75 73 Gross domestic fixed investment 25 25 25 24 26 23 26 27 28 Government investment 4 5 6 6 6 7 7 7 7 Private investment 21 20 19 17 20 17 19 20 21 Exports (GNFS)b 30 29 25 21 22 22 21 21 21 Imports (GNFS) 41 39 39 28 31 32 30 29 29 Gross domestic savings 17 18 14 18 19 20 23 25 27 Gross national savingsc 22 23 18 24 25 26 29 31 33 Memorandum items Gross domestic product 28267 32351 40715 42068 49552 58018 67318 78824 88198 (US$ million at current prices) GNI per capita (US$, Atlas method) 1380 1560 1770 1990 2290 2580 3010 3500 3970 Real annual growth rates (%, calculated from 02 prices) Gross domestic product at market prices 7.7 6.8 6.0 3.5 8.0 8.5 9.0 9.5 8.5 Gross Domestic Income 6.4 5.8 3.1 10.0 7.4 8.5 8.9 9.4 8.3 Real annual per capita growth rates (%, calculated from 02 prices) Gross domestic product at market prices 6.5 6.1 5.2 2.1 6.9 7.4 7.9 8.4 7.4 Total consumption 5.9 3.9 7.1 2.1 7.4 11.9 9.6 10.9 10.8 Private consumption 5.4 3.3 6.7 -0.5 9.1 11.9 9.6 10.9 10.8 Balance of Payments (US$ millions) Exports (GNFS)b 8508 9415 10115 8977 10775 12674 14463 16469 18886 Merchandise FOB 6883 7640 8111 7085 8307 9626 10876 12341 14027 Imports (GNFS)b 11621 12768 15694 11708 15282 18289 20375 22684 25208 Merchandise FOB 10253 11296 14091 10207 13512 16389 18275 20334 22558 Resource balance -3113 -3353 -5579 -2731 -4507 -5615 -5912 -6215 -6322 Net current transfers 2005 2311 2666 3004 3660 3975 4459 4977 5322 Current account balance -1497 -1400 -3885 -214 -1419 -2140 -1953 -1738 -1500 Net private foreign direct investment 451 548 691 384 435 1000 1000 1000 1000 Long-term loans (net) 491 672 252 840 1796 2000 2000 2000 2000 Official 371 283 0 0 0 0 0 0 0 Private 120 389 252 840 1796 2000 2000 2000 2000 Other capital (net, incl. errors & ommissions) 454 851 1835 2455 1027 640 453 238 0 Change in reservesd 101 -671 1107 -3465 -1839 -1500 -1500 -1500 -1500 Memorandum items Resource balance (% of GDP) -11.0 -10.4 -13.7 -6.5 -9.1 -9.7 -8.8 -7.9 -7.2 Real annual growth rates ( YR2002 prices) Merchandise exports (FOB) 9.1 5.7 2.6 -11.8 16.7 15.3 11.9 12.3 12.5 Primary .. .. .. .. .. .. .. .. .. Manufactures 7.3 3.1 0.3 -4.7 6.5 14.8 11.9 12.3 12.6 Merchandise imports (CIF) 15.2 5.1 14.5 -28.8 30.1 20.7 11.0 10.8 10.5 (Continued) 36 Key Economic Indicators (Continued) Actual Estimate Projected Indicator 2006 2007 2008 2009 2010 2011 2012 2013 2014 Public finance (as % of GDP at market prices)e Current revenues including grants 17.3 16.6 15.6 15.0 14.9 15.6 16.3 16.6 16.7 Current expenditures 18.6 17.4 16.9 18.2 16.7 16.0 15.0 14.8 14.9 Current account surplus (+) or deficit (-) -1.4 -0.8 -1.3 -3.2 -1.8 -0.4 1.3 1.8 1.8 Capital expenditure 5.6 6.1 5.7 6.7 6.1 6.0 6.2 6.5 6.4 Foreign financing 2.5 3.7 0.6 5.3 4.7 2.6 1.3 1.1 1.1 Monetary indicators M2/GDP 42.5 41.8 37.5 40.5 40.2 40.0 39.8 39.7 39.5 Growth of M2 (%) 17.1 19.8 10.6 18.4 14.9 14.5 14.5 14.5 14.5 Private sector credit growth / 98.8 124.6 34.2 -149.1 97.6 108.0 101.9 99.9 98.5 total credit growth (%) Price indices( YR2002 =100) Merchandise export price index 160.7 168.8 174.7 172.9 173.8 174.7 176.4 178.2 180.0 Merchandise import price index 165.6 173.5 189.1 192.5 195.9 196.8 197.7 198.6 199.4 Merchandise terms of trade index 97.1 97.3 92.4 89.8 88.7 88.8 89.2 89.7 90.2 Real exchange rate (US$/LCU)f 100.0 100.3 118.4 120.9 123.7 126.2 128.7 131.3 133.9 Real interest rates Consumer price index (% change) 10.0 15.8 22.6 3.4 5.9 7.0 7.0 7.0 7.0 GDP deflator (% change) 11.3 14.0 16.3 5.9 7.3 5.9 5.5 5.0 6.0 a. GDP at factor cost b. "GNFS" denotes "goods and nonfactor services." c. Includes net unrequited transfers excluding official capital grants. d. Includes use of IMF resources. e. Consolidated central government. f. "LCU" denotes "local currency units." An increase in US$/LCU denotes appreciation. 37 Annex B7: Key Exposure Indicators Actual Estimated Projected Indicator 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total debt outstanding and 11922 14417 15660 17273 18118 18719 18183 17525 16640 disbursed (TDO) (US$m)a Net disbursements (US$m)a 382 1162 354 1772 870 601 -536 -658 -885 Total debt service (TDS) 944 837 1232 1418 1273 1269 1857 1576 1509 (US$m)a Debt and debt service indicators (%) TDO/XGSb 108.6 116.6 120.5 139.0 119.1 107.4 92.1 78.6 66.3 TDO/GDP 42.2 44.6 38.5 41.1 36.6 32.3 27.0 22.2 18.9 TDS/XGS 8.6 6.8 9.5 11.4 8.4 7.3 9.4 7.1 6.0 Concessional/TDO 74.9 67.3 62.0 56.2 53.6 51.9 53.4 55.4 58.3 IBRD exposure indicators (%) IBRD DS/public DS .. .. .. .. .. .. .. .. .. Preferred creditor DS/public 38.2 26.1 27.5 26.7 31.3 31.2 24.0 47.2 45.9 DS (%)c IBRD DS/XGS .. .. .. .. .. .. .. .. .. IBRD TDO (US$m)d 0 0 0 0 0 0 37 75 96 Of which present value of guarantees (US$m) Share of IBRD portfolio (%) 0 0 0 0 0 0 0 0 0 IDA TDO (US$m)d 2245 2357 2381 2487 2535 2574 2575 2553 2501 IFC (US$m) Loans 31.5 26.6 135.7 84.8 92.7 72.2 Equity and quasi-equity /e 23.2 30.3 38.7 24.2 17.6 17.2 MIGA MIGA guarantees (US$m) a. Includes public and publicly guaranteed external debt, private nonguaranteed, use of IMF credits and net short- term capital. b. "XGS" denotes exports of goods and services, including workers' remittances. c. Preferred creditors are defined as IBRD, IDA, the regional multilateral development banks, the IMF, and the Bank for International Settlements. d. Includes present value of guarantees. Projection only includes the impact of FY12 IBRD commitment. e. Includes equity and quasi-equity types of both loan and equity instruments. 38 Annex B8: Operations Portfolio (IBRD/IDA and Grants) As of 4/11/2011 Closed Projects 97 IBRD/IDA * Total Disbursed (Active) 646.79 of which has been repaid 0.00 Total Disbursed (Closed) 630.39 of which has been repaid 411.11 Total Disbursed (Active + Closed) 1,277.18 of which has been repaid 411.11 Total Undisbursed (Active) 513.57 Total Undisbursed (Closed) 2.06 Total Undisbursed (Active + Closed 515.63 Active Projects Difference Between Last PSR Expected and Actual Supervision Rating Original Amount in US$ Millions Disbursements a/ Development Implementation Project ID Project Name Fiscal Year IBRD IDA GRANT Cancel. Undisb. Orig. Frm Rev'd Objectives Progress P087145 2nd Comm Devt and Livelihood Improvement MU MS 2010 75 55.4802771 -1.39014354 P086747 Community Livelihoods in Conflict Areas S MS 2004 76.7 36.0422668 19.51586536 18.59710608 P093132 Dam Safety and Water Resources Planning S MS 2008 65.3277 50.8930509 35.39560996 P081771 E-Sri Lanka Development MS MS 2005 53 18.271878 15.38343391 P084580 Education Sector Development Project S S 2006 70 0.42861211 -13.70391878 -5.60488792 P118870 Emergency Northern Recovery Project S MS 2010 65 25.2735763 -23.68317817 P113402 Higher Education forTwenty First Century S S 2010 40 37.4634816 1.53125 P113036 N&E Local Services Improvement S S 2010 50 39.0374792 P083932 North East Housing Reconstruction Progra S S 2005 118 12.3941291 -31.29697326 P107847 Provincial Roads Project S S 2010 105 88.884048 P097329 Public Sector Capacity Building MS MS 2008 22.6 13.0723612 11.3421267 P076702 Renewable Energy for Rural Economic Dev. S S 2002 115 8.06177255 -44.37964869 -5.22255088 P121328 SME Development Facility # # 2011 57.4 60.004476 P086411 Sri Lanka - Road Sector Assistance S S 2006 198.1 37.0184816 -65.30344674 33.16655323 P100390 Sri Lanka: Puttalam Housing Project MU MU 2007 32 12.8860088 10.98253877 10.95033258 P113709 Sustainable Tourism Development Project S S 2010 18 18.361756 Overall Result 1161.1277 513.573655 -112.1558315 51.88655309 39 a. Intended disbursements to date minus actual disbursements to date as projected at appraisal. IBRD 33485 80°E 81°E I N DIA SRI LANKA 10°N 10°N SELECTED CITIES AND TOWNS PROVINCE CAPITALS it r a Point Pedro NATIONAL CAPITAL St RIVERS k Jaffna MAIN ROADS Pal Delft Elephant Pass RAILROADS Island PROVINCE BOUNDARIES Palk Bay Killinochchi INTERNATIONAL BOUNDARIES Iranamadu Tank Mullaittivu Ferr y Ad Talaimannar Manakulam am 's B ridge 9°N Mannar Island Mannar NORTHERN Pulmoddai Aruvi A Vavuniya ru SRI LANKA Trincomalee Gulf of Karaitivu NORTH CENTRAL Island Rambewa Mutur Mannar Anuradhapura Yan Oya Galkulama Kalpitiya Ka Kaud la Oya ulla Oya Bay of Bengal Puttalan Habarane 8°N 8°N NORTH Madura Oya WESTERN Maho Oya Batticaloa uru ed Kattankudi Mahaweli Ganga D EASTERN Chilaw Madura Oya Kurunegala Reservoir Kalmunai CENTRAL ha O y a Ma Ampara Kandy ya Gal Oy Negombo Kegalla Victoria Falls Reservoir U VA Pidurutalagala Senanayake WESTERN (2,524 m) Samudra 7°N g Badulla 7°N Kelan Gan COLOMBO Sri Jayewardenepura Kotte Pottuvil Monaragala Moratuwa Ratnapura lu Wellawaya Ka Kirin SABARAGAMUWA Kalutara d i Oya Kumana Laccadive Wala Kataragama w INDIAN eG Sea an OCEAN g a SOUTHERN Hambantota Galle 6°N Tangalla 0 20 40 60 Kilometers 6°N Matara This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information Dondra Head shown on this map do not imply, on the part of The World Bank 0 10 20 30 40 Miles Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. 80°E 81°E 82°E SEPTEMBER 2004