Washington, June 18: The World Bank has approved a loan of USD 125 million to help Sri Lanka reduce poverty and improve governance to create a secure investment climate in the strife-torn island. The loan, granted under the new poverty reduction support credit scheme, is aimed at helping the island achieve a GDP growth rate of seven percent in the next three years, a bank statement said.

A major portion of the loan would be used to rebuild infrastructure in North-Eastern parts of the island, the region affected by conflict between the government and LTTE.

"It is vital to restore and improve public services in the North East of Sri Lanka, and a significant proportion of the resources provided under this credit are designed to facilitate this," the statement said. "With the successful implementation of the government's programme, Sri Lanka has a great opportunity to strengthen macroeconomic stability and achieve an economic performance commensurate with its human and natural resources, "said Tercan Baysan, World Bank team leader for the project.

The bank said that it was committed to supporting poverty reduction in the island nation and it could be achieved only through economic development. Lankan government and the LTTE have made the World Bank the custodian of foreign aid pledged to rebuild the island.

The USD 125 million loan carries no interest but comes with a 0.75 per cent service charge maturing in 40 years with a grace period of 10 years.

Bureau Report