Rome Embassy initiative:

Sri Lanka, IFAD sign loan agreement for $ 25 m

A US $ 25 million loan agreement for the National Agribusiness Development Program was signed today in Rome by Ambassador Hemantha Warnakulasuriya, on behalf of the Government of Sri Lanka, with Kanayo Nwanze, President of International Fund for Agricultural Development (IFAD).

The loan agreement, which will come into immediate effect, has highly confessional terms, such as repayment period of 40 years, including 10 year grace period and with a service charge of three fourths of one percent (0.75%) per annum. The loan will contribute to the government's medium-term (2010-2016) investment plan in the agriculture sector, estimated at US $ 1.02 billion.

The objective of the National Agribusiness Development Programme, which will provide small farmers with necessary financial and technological assistance enabling them to engage actively in agricultural value chains as equal partners, is to eradicate poverty and improve the livelihoods in the rural sector. It aims to increase the incomes of approximately 57,900 poor smallholder farmers in Kurunegala, Kegalle, Puttalam, Ratnapura and Ampara by 20 to 30 per cent by providing business expertise so that farmers can take part in joint ventures as equal partners with the private sector, providing access to financial resources so that farmers can take advantage of emerging opportunities helping them overcome poverty, building farmers' processing capacity and providing them with better access to markets and increasing on-farm productivity leading to better farm-gate prices.

The proposed programme will assist poor rural farmers to form companies, to own shares in processing centres, and to ultimately get an income from business contracts with private companies and community-based organizations. Total cost of the project is estimated at US$33.0 million of which 75% or US$ 25.0 million has been provided by the IFAD.

Ambassador Warnakulasuriya after signing the agreement said that "the "loan has come at an opportune time, when Sri Lanka is embarking with renewed vigor on development strategies and programmes to eradicate poverty and build a peaceful and prosperous society, after eradicating three decades of terrorism in the country." He pointed out that "the government of President HE Mahinda Rajapaksa has accorded utmost attention to poverty reduction and more so to rural poverty through implementation of rural development and the agriculture sector development strategies and programmes. The development of the rural economy and support for small and medium enterprises form the central pillars of our policy for enhancing people's livelihoods, ensuring a better quality of life and empowering our rural people, who are the bed-rock of our economy. It gives priority to youth, women, and the most vulnerable groups." He added that "the IFAD loan will greatly contribute to the implementation of government ten year development plan envisioned in the 'Mahinda Chintana' in which the agribusiness development is a key pillar".

President of IFAD Kanayo Nwanze, said that "We are glad to note that Sri Lanka has now emerged from over two decades of civil conflict. The present programme is the first IFAD-supported intervention whose design has been completed in the aftermath of the civil conflict. As such, it includes provisions to support conflict prevention and peace-building in Sri Lanka, specifically by ensuring equitable access to resources, services, technologies and markets throughout the country."

Sri Lanka has been the recipient of generous development assistance, which IFAD has been providing overtime. IFAD, which has worked in partnership with the Government of Sri Lanka and other donors since 1978, has committed a total of US$ 217 million for 15 projects with the aim of empowering rural poor people to overcome poverty. Benefits of completed and ongoing projects help improve the lives and livelihoods of some 518,332 households, or 2.2 million people. In 2005, in response to the urgent priority of recovery from the devastating effects of the tsunami in the north-east, east, south and south-west coastal areas of Sri Lanka, IFAD earmarked a total of about US$34.5 million in loans and grants for assistance. The sum is part of an initial US$100 million in IFAD-mobilized funds assisting tsunami-stricken countries.

IFAD has entered into consultation with the government of Sri Lanka to open an IFAD Country Office in Sri Lanka, with a view to better coordination, implementation and monitoring of the ongoing and envisaged IFAD programmes in Sri Lanka.

IFAD, a specialized agency of the United Nations, was established as an international financial institution in 1977. It is dedicated to eradicating rural poverty in developing countries. Working with rural poor people, governments, donors, non-governmental organizations and many other partners, IFAD focuses on country-specific solutions, which can involve increasing rural poor peoples' access to financial services, markets, technology, land and other natural resources.