Aiding Crises

In 2020, the World Bank issued a loan to the government of Sri Lanka for the  COVID-19 Emergency Response and Health Systems Preparedness Project . Amounting to a total of USD 298 million dollars, the project was meant to aid the response of the government in responding to the pandemic and to strengthen national public health systems. While the pandemic presented a challenge to domestic resources of developing countries, the World Bank issued a loan during a time when Sri Lanka was facing debt distress. Furthermore, the project, which included support to the vaccination drive and the cash transfer program, faced various issues impacting people’s access to much-needed services. 

The  Law & Society Trust (LST)  launched a CSO Campaign looking into the impacts of the COVID-19 loan from the World Bank. The organization published a comprehensive research, looking into the bank’s policies and interviewing affected peoples. The research was used to engage with officials of the World Bank and government, as LST advocated for meaningful engagement with affected peoples, in order to address their needs in light of the pandemic. LST’s work also extended beyond this specific project as it tackled the role of international finance institutions (IFIs) in the worsening economic crisis faced by the country. 

In 2023, LST released  Civic Watch Review of the World Bank and Sri Lanka’s COVID-19 Emergency Response , an in-depth research that details the gaps in the World Bank project and the government’s pandemic response. Problems faced in the implementation of the government’s pandemic response can be rooted in the lack of meaningful stakeholder engagement of affected communities and sectors. For the cash transfer program, this led to the exclusion of marginalized groups as beneficiaries. There was a reported instance where transwomen experienced discrimination in claiming these benefits. While the aid was meant to provide assistance to individuals and families during the lockdown, it was also exploited by local politicians to garner votes during the elections. 

Meanwhile, it was noted that there was a militarized response for the vaccination program. There was a general lack of information regarding the vaccine and its side effects, which made some people frightened of getting it. Instead of thoroughly explaining it to the public, armed forces were deployed to visit houses and convince them to get the vaccine. In some villages, security forces had a separate vaccination program with the Ministry of Health. With this, some people got the vaccine out of fright and coercion by the military. 

LST notes that these issues could have been possibly mitigated and solved if there was proper engagement with a wide range of stakeholders. While the World Bank has its own Stakeholder Engagement Plan (SEP), most of the time, it does not ensure wide, meaningful and inclusive consultation with affected communities. It is merely a desk exercise, a tick box, required for project implementation. While there were grievance redress mechanisms available for both programs, civilians feared reprisals from local authorities, and for those that utilized these, their issues were not properly resolved. 

Furthermore, LST also highlighted the failure of the bank and the government to disclose information in a timely and accessible manner. Documents were not translated to the local languages of Sinhala and Tamil, and were not compiled properly. These also remained to be only accessible online and not properly disseminated in person. The lack of transparency from the World Bank and the government also hinders people from raising concerns and demands, either through the stakeholder engagement process or the grievance redress mechanism. 

LST’s research also forwarded recommendations on how the World Bank should improve its financing of cash transfer programs and emergency health response in the country, which includes revisiting its Environmental and Social Framework (ESF) and Stakeholder Engagement Plan (SEP). These recommendations were forwarded to World Bank officials. 

The World Bank provided a total of  USD 298 million  for this project, with USD 89 million coming from the International Bank for Reconstruction and Development and the rest coming from the International Development Association. Only USD 1.72 million of the financing came in grants, while the remaining added to government debt that reached USD 51 billion in 2022. During the pandemic, the Rajapaksa government of Sri Lanka also defaulted on its foreign debts, due to the misuse of funds to rescue state-owned companies from bankruptcy, pursuing populist policies, and promoting infrastructure-led development. This contributed to the rising costs and shortage of food, fuel and medicine. 

In March 2023, the government under President Ranil Wickremesinghe entered into the Extended Fund Facility Agreement with the International Monetary Fund (IMF). The  agreement provided for a USD 3 billion loan and required the reform of economic and social policies .

This led to the increase in electricity prices and value added tax, inflation in food prices, decrease in wages, loss of livelihoods, and a new targeted cash transfer scheme. The government also subjected the Employees Provident Fund and Employees Trust Fund, which consist of contributions from the workers, for debt repayment. All of these reforms have disproportionately impacted the marginalized as they face limited access to services, loss of livelihoods, and increase in taxes. 

The agreement with the IMF also allowed the government to borrow more money from other international finance institutions, such as the World Bank and the Asian Development Bank. Given that the economic situation of Sri Lanka has triggered a cost-of-living and humanitarian crisis, the people have been calling for the canceling of debts in order to free up fiscal space to provide for people’s immediate needs.