Sri Lanka Cabinet approves $60 million OPEC Fund loan for Mahaweli project Phase 2
EconomyNext: Sri Lanka’s Cabinet of Ministers has approved a proposal to enter into an agreement with the OPEC Fund for International Development (OFID) to secure a 60 million US dollar loan facility for Phase 2 of the Mahaweli Water Security Investment Program (MWSIP).
The total estimated cost for Phase 2 of the program is 536.5 million dollars, which the government plans to finance through co-financing arrangements with multiple development partners. The Asian Development Bank (ADB) has already agreed to provide 200 million dollars toward the programme.
“Phase 2 of the Mahaweli Water Security Investment Program is planned for implementation to achieve the Government’s long-term objectives: enhancing food security in the Dry Zone, strengthening water resource management, improving resilience to climate change, and alleviating poverty,” Minister Nalinda Jayatissa said.
Following prior cabinet approval on July 20, 2026, to begin negotiations with OFID, the development fund confirmed its willingness to provide the 60 million dollar facility in two components of 48 million dollars and 12 million dollars.
The proposal was submitted by the President in his capacity as the Minister of Finance, Planning, and Economic Development.
Under Phase 2, key construction works include finishing the remaining section of the main tunnel with about seven kilometers of excavation, constructing 68 kilometers of open and covered canals, conduits, and short tunnels, and building an eight-kilometer canal section for the Ellapothana Irrigation Project.
The project will also establish commercial farming infrastructure, including around 13 pressurized distribution networks to supply reliable irrigation water for high-value and field crops.
The cabinet paper noted that the phase will also focus on: “Transforming agricultural production systems by introducing climate-resilient value chains and expanding farmers’ access to financial services and agricultural project-related services.”
OSL take:
Sri Lanka’s expanding development programme is creating business and investment opportunities for foreign companies/investors, particularly in infrastructure, agriculture, water management, energy and technology, as the Government seeks international financing and private-sector partnerships to accelerate economic development. The latest phase of the Mahaweli Water Security Investment Programme (MWSIP) highlights the scale of infrastructure and commercial opportunities emerging from the country’s development agenda. With financing support from the ADB and the OPEC Fund for International Development, the programme aims to strengthen water security, expand irrigation facilities and improve agricultural productivity in the Dry Zone. Such large-scale projects create opportunities for foreign engineering and construction companies, irrigation technology providers, infrastructure developers, equipment suppliers and project management consultants. Investment potential also extends to commercial agriculture, particularly through the development of pressurised irrigation systems, modern farming infrastructure and climate-resilient agricultural value chains. Foreign businesses could explore partnerships with local companies in agricultural technology, seed development, food processing, cold storage and supply-chain management. Beyond agriculture, Sri Lanka’s broader development priorities offer opportunities in transport infrastructure, renewable energy, water treatment, logistics, digital services and industrial development. International companies can participate through direct investments, public-private partnerships, joint ventures, technology transfers and government-backed development projects. The Sri Lankan Government’s increasing engagement with multilateral development banks and international financing institutions also provides avenues for foreign businesses to participate in projects supported by development financing. As Sri Lanka advances its infrastructure and economic modernisation agenda, foreign investors and businesses have opportunities to contribute capital, technology and expertise while accessing emerging commercial opportunities across multiple sectors.
| Article Code : | VBS/AT/20261105Z_3 |