The ADB has approved a USD $100 million loan to support Sri Lanka’s power-sector reforms, but critics say the 2025 Electricity Act amendments conflict with the principles of the 2024 Act, which came under a package of IMF-backed reforms.
The loan is aimed at accelerating IMF-backed reforms mandated by the Electricity Act of 2024 and its subsequent amendment in 2025, which facilitate a restructuring of the Ceylon Electricity Board (CEB).
ADB Country Director for Sri Lanka Takafumi Kadono, said
“ADB is committed to supporting Sri Lanka’s long-term development and advancing key reforms in the power sector. This initiative will enhance power sector governance, foster private sector participation, and accelerate renewable energy development to drive sustainable recovery, resilience, and inclusive growth.”
The loan supports the second subprogram of the ADB's Power Sector and Reforms and Financial Sustainability Program, which supports debt restructuring and the proposed unbundling of the CEB. This process aims to attract private sector participation across generation, transmission, and distribution. The program also aims to improve efficiency and accountability within the CEB, which has a debt of 200 billion LKR.
However, critics have argued that the 2025 amendments reverse one of the core policies of the 2024 Act, which required the 'unbundling' of the CEB.
The amendment in 2025, which drew criticism from the World Bank and Japan International Cooperation Agency, is said to have reneged on the further unbundling of generation and distribution companies to 4 generation companies and 4 distribution companies as proposed in 2024 Act. It has now been proposed to be undertaken in the second stage, and the number of companies in the second stage has not been mentioned in the Act.
In addition, the government ownership in the Transmission Company to take over the existing National Grid has been increased to 100% from 51% while retaining the provision to allow private sector investments in new transmission assets.
The amendments also fail to incentivise rooftop solar and grid-scale batteries.
The national grid was severely damaged by Cylcone Ditwah, with the economic damage across the island said to be several times greater than the 2004 Boxing Day Tsunami, with preliminary estimates putting the losses at USD $6 to $7 billion.
The rebuilding and reconstruction of essential utilities across the North East, particularly conflict-impacted areas, would be required. However, development across the region has often been overlooked by successive governments, despite the population being one of the most vulnerable to climatic shocks.
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