In recent years, the relationship between the United States and Sri Lanka has witnessed a substantial transformation, transitioning from conventional foreign aid to a more comprehensive partnership that encompasses economic, environmental, and human rights initiatives to help Sri Lanka come out of the bankruptcy. The United States supported Sri Lanka's development objectives, reconciliation efforts, and regional connectivity through multifaceted collaborations between 2022 and 2024. This article investigates the numerous methods by which the United States assisted Sri Lanka in its development, resulting in enduring effects that surpass financial aid.
Fostering Economic Growth and Governance
The United States Agency for International Development (USAID) signed a defining five-year Development Objectives Assistance Agreement (DOAG) with Sri Lanka in 2022. This agreement facilitated market-driven growth, environmental sustainability, and improved governance. The U.S. actively supported stabilization efforts in Sri Lanka, including aiding in debt restructuring processes and supporting Sri Lanka's engagement with the International Monetary Fund (IMF), in recognition of the country’s economic challenges. By means of these initiatives, the United States promoted private-sector investment, anti-corruption measures, and reforms that are indispensable for long-term economic resilience, transcending financial assistance.
Investing in Sri Lanka
U.S. companies exhibited a fluctuating yet substantial interest in investing in Sri Lanka from 2022 to 2024. The total stock of US Foreign Direct Investment (FDI) in Sri Lanka was valued at $234 million in 2022. IFS (Industrial and Financial Systems), an IT services firm based in the United States, has maintained a substantial presence in Sri Lanka for many years. The company has recently declared its intention to expand its operations in Colombo, citing the country’s highly skilled tech workforce. In that year, the total U.S. Foreign Direct Investment (FDI) stock in Sri Lanka reached $234 million as a result of this expansion. Despite the country's economic instability at the time, several U.S. apparel brands, including Gap and Nike, increased their procurement from Sri Lanka in 2023. However, direct FDI in new facilities was cautious. Nevertheless, Coca-Cola Beverages Sri Lanka Ltd and other organisations maintained their operations and implemented sustainability initiatives, suggesting that there was a persistent interest.
Investor confidence began to slightly improve by 2024 as Sri Lanka made progress in debt restructuring and economic stabilisation. This prompted smaller U.S. tech startups and healthcare companies to investigate joint ventures and partnerships with local firms. Sri Lanka's greatest export market was the United States, despite the fact that it experienced a severe financial crisis in 2022, which resulted in a contraction in GDP and shortages of essential goods.
Foreign investment in Sri Lanka was approximately $730 million in 2023, despite the fact that it was historically lower than that of other comparable countries. The International Development Finance Corporation (DFC) of the United States has allocated up to $553 million in financing for the expansion of the Colombo West International Terminal. This commitment indicates the government's confidence in the private sector's development in Sri Lanka.
The Sri Lankan government’s emphasis on anti-corruption measures and political changes resulted in a notable resurgence in US investment interest by late 2024. The American engineering technology group Transdigm Group invested $8.5 million in a joint venture to establish a manufacturing facility in Sri Lanka, thereby relocating its SHIELD operations from China. This investment is a notable example. This action was perceived as a testament to the increasing interest of the United States in investing in Sri Lanka, particularly in light of the government's initiatives to enhance the investment climate and guarantee transparency. The US Ambassador to Sri Lanka emphasised the potential for additional manufacturers to contemplate similar actions if the investment climate continues to improve.
Infrastructure Development
The West Container Terminal at the Port of Colombo, which is being developed with the support of the U.S. International Development Finance Corporation (DFC), is a significant milestone in Sri Lanka's infrastructure investment. This initiative is intended to establish the port as a regional connectivity hub, with a $553 million investment. This initiative not only reinforces Sri Lanka's strategic position in global trade but also significantly stimulates the local economy by improving the port’s capacity and efficiency.
It is anticipated that this investment will generate employment opportunities in a variety of sectors, including logistics and construction, and will also stimulate economic activity. Furthermore, it enhances Sri Lanka's capacity to manage an increase in maritime traffic, thereby guaranteeing its continued competitiveness in the increasingly critical Indian Ocean shipping lanes.
Climate Change and Environmental Collaboration
Sri Lanka has established an ambitious objective of generating 70% of its electricity from renewable energy sources by 2030. The United States has provided technical expertise and funding for renewable energy projects, such as solar and wind energy initiatives, in order to support this objective. Sri Lanka is committed to achieving carbon neutrality by 2050. The United States has collaborated with Sri Lanka to establish strategies and frameworks for the reduction of greenhouse gas emissions in various sectors, including energy, transport, and agriculture.
The Global Climate Promise Exchange Workshop was held in Sri Lanka in March 2024, with the assistance of the United Nations Development Programme (UNDP) and Japan. The event convened 16 countries to exchange best practices and lessons learnt in the implementation of climate commitments under the Paris Agreement. Sri Lanka initiated an initiative in August 2024 to create its inaugural Biennial Transparency Report in accordance with the Paris Agreement. The initiative, which is backed by the Global Environment Facility and UNDP, is designed to improve transparency and accountability in climate action by monitoring the progress of national climate commitments. USAID sponsored the ‘Climate Challenge SL’ hackathon in late 2024, which aimed to encourage data professionals to create innovative, data-driven solutions for climate-related issues in agriculture and fisheries.
The objective of the event was to promote collaboration and employ technologies such as AI and IoT to address climate resilience challenges. A climate adaptation initiative that prioritised agriculture, fisheries, and tourism was implemented in September 2024 through a partnership between USAID and SDB Bank. The objective of this initiative is to strengthen governance and promote market-based growth in order to increase the ability of the private sector, civil society, and government to address climate change.
The project involves the creation of financial products that are specifically designed to meet the requirements of climate adaptation and the development of resilience in vulnerable communities. Ceylon Cold Stores PLC entered into a partnership with USAID's Ocean Plastics Reduction Activity in October 2023 to establish Sri Lanka's inaugural women-led plastic recycling network. To foster economic resilience and environmental stewardship, the initiative empowers women from coastal communities to acquire and process recyclable materials. The programme had collected more than 1,175 kilos of plastic waste by 2023.
Promoting Human Rights and Reconciliation
The United States has implemented proactive measures to advocate for Sri Lanka’s reconciliation and human rights protection. This engagement has been instrumental in assisting the nation in its recovery from the repercussions of a decades-long civil conflict and in confronting the underlying issues that are necessary to establish a more inclusive and peaceful society.
The United States has consistently underscored the significance of accountability for historical human rights violations, urging Sri Lanka to investigate and address alleged abuses that occurred during and after its civil conflict. The United States has promoted independent investigations to ensure justice for victims and their families through bilateral discussions and international forums such as the United Nations Human Rights Council (UNHRC).
The United States has provided support for constitutional reform efforts in Sri Lanka, acknowledging the significance of political reforms in promoting inclusivity. These reforms are intended to address concerns such as the devolution of power, minority rights, and the establishment of mechanisms that account for the aspirations of all communities in the country.
The United States has collaborated with Sri Lankan institutions, such as the judiciary and law enforcement, to improve their ability to address human rights concerns through programs and seminars. This encompasses instruction on the preservation of international human rights standards, investigative techniques, and legal procedures.
The United States has maintained robust relationships with Sri Lanka's civil society organisations, offering them resources and platforms to elevate the voices of marginalised groups and promote reform. This encompasses assistance for community-based initiatives that emphasise education, social cohesion, and reconciliation.
The United States has actively promoted inter-religious and inter-ethnic dialogue in Sri Lanka. The U.S. has promoted grassroots initiatives that promote understanding and cooperation among diverse communities, thereby reducing tensions and establishing trust.
The United States’ dedication to assisting Sri Lanka in its pursuit of a more equitable and harmonious future is underscored by these endeavours. The partnership endeavours to guarantee that peace, justice, and inclusivity are ingrained in the social and political fabric of Sri Lanka by confronting the underlying causes of conflict and advocating for systemic change.
Strengthening People-to-People Exchanges
The two nations have been able to cultivate mutual understanding and benevolence through cultural and educational exchanges. The United States has implemented initiatives that fortify relationships, empower youth, and advance shared principles of democracy, diversity, and innovation.
The United States has been instrumental in fostering Sri Lanka's growth and stability from 2022 to 2024, through economic investments, environmental initiatives, and human rights advocacy. The United States has assisted Sri Lanka in overcoming obstacles and establishing the groundwork for regional cooperation and sustainable development by emphasising multifaceted partnerships. The power of cooperation in addressing urgent global and national issues is demonstrated by the partnership’s ongoing evolution.
