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Serving Sri Lanka

This web log is a news and views blog. The primary aim is to provide an avenue for the expression and collection of ideas on sustainable, fair, and just, grassroot level development. Some of the topics that the blog will specifically address are: poverty reduction, rural development, educational issues, social empowerment, post-Tsunami relief and reconstruction, livelihood development, environmental conservation and bio-diversity. 

Tuesday, May 17, 2005

Funding Shortfall for Tsunami Reconstruction

Sunday Island: 15/05/2005" By Kanes

The Asian Development Bank stated at an international conference held in Manila in mid-March that rehabilitation and reconstruction in India, Indonesia, the Maldives and Sri Lanka, would need some US US $7.76 billion (Table 1).

So far, only US $3.54 billion has been committed by donor nations and agencies, leaving a funding gap of some US $4.22 billion. Details of aid commitments by some of the countries are in Table 2. (Figures are not the same as given to the Manila Conference.) Total aid commitments add up to US $1,118.1 million or Rs. 109,594 million, additional amount expected US $600 million or Rs. 58,800 million and debt relief US $15.2 million or Rs. 1,490 million (Table 3).

Thailand is not included in the matrix as it has not sought international assistance for reconstruction and rehabilitation. There are still gaps in this calculation but it can be used as a planning tool for donors, affected countries, NGOs and the like to get a broad view of what is needed, where the aid is needed and how much will be the cost.

Past experience of crisis-hit countries indicates however that the aid pledges are rarely fulfilled. The Iranian city of Bam, for example, where an earthquake killed some 30,000 people in December 2000, has, so far seen only US $17 million or 1.5 per cent of the US $1.1 billion in aid pledged at the time of disaster. In Afghanistan again, donors pledged US $2 billion in 2002 of the first crucial year of rebuilding, but it received only a fraction of this `F1 US $90 million or 4.5 per cent. Many Afghans have lost faith since then and now direct their bitterness at the relief workers who are there. There is a strong possibility that a similar situation will develop in Sri Lanka.

The main cause of the delay in making commitments is that donors are reluctant to give blank cheques; instead, they want to choose and pick which relief and reconstruction efforts they want to fund. The matching of donors to dozens of projects in four countries as well as to overall regional aid is a long and complex exercise and takes time. Further, donors want to monitor these projects in order to ensure that their funds do not feed corruption or are wasted. Asian Development Bank, President, Kuroda said at the conference that the distribution of the aid pledged must "be predictable, transparent, strategic and effective". "Priorities and doing things in the right order are important". "As the recovery effort now moves from initial relief and rehabilitation and reconstruction, it is essential to keep the world’s attention focused on the continued support and ensure that donor confidence in our efforts remain high".

Take for example, the World Bank. The World Bank International Development Association (IDA) has agreed to provide US $150 million (Rs. 14,700 million) for the Tsunami Emergency Recovery Project (TERP). Of this US $75 million (Rs. 735 million) has already been allocated for reconstruction and programmes in health, education, infrastructure, roads and housing under the TERP-Phase I signed on Friday 15 2005. The balance US $ 75 million that will be provided under TERP Phase II will be utilized for the reconstruction of houses, improvements of infrastructure and rebuilding of livelihood. The TERP-II US $75 million comprises a grant of US $30 million and a concessional credit of US $45 million. As the agreements were signed in February and March, it is likely that the country has not yet received any funds from these allocations.

Actual Receipts

According to a Central Bank press release at the end of March, a sum of Rs. 11,222.1 million has been received by the government, non-governmental organizations, and others in Sri Lanka as private, foreign and local donations through the banking channels towards tsunami relief. This includes Rs. 1,403.1 million received by the government through the Central Bank and the two state commercial banks. The paltry sum of Rs. 1,403.1 million received by the government stands in contrast to the US $864 million or Rs. 82,944 million of aid commitment of Manila. This is only 1.7 per cent of the commitment ! This clearly shows that although billions had been promised and committed, Sri Lanka has hardly received any of these funds yet.

The curious thing is that while the government received only Rs. 1,403.1 million, non-governmental organizations have obtained Rs. 9,819 million or about seven times that received by the government. Apparently non-governmental organizations are better funded than the government by foreign donor agencies. Table 4

If the actual receipts are slow and prospects of quicker delivery are not bright, the government will have no alternative to postponing reconstruction or using its own funds in the initial years of reconstruction. Meanwhile, NGOs can do a good part of the work such as house reconstruction with their own funds. Of course, it is no secret that the country is facing financial difficulties with yawning budget deficits and rising reconstruction expenditure; in fact, it has requested debt relief to tide over the situation. Foreign aid in whatever form takes time and we should not be too optimistic regarding aid flows for reconstruction.

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