Safety Net

November 17, 2006 (LBO) – Sri Lanka said Thursday they were exploring the possibility of setting up a 40 million dollar government guaranteed fund with World Bank assistance, to encourage private investment in the war torn north and east, officials said. Mooted under the Multilateral Investment Guaranty Agency or MIGA arm of the World Bank, the proposal is styled on the lines of MIGA sponsored initiatives in conflict affected countries, Srilal Perera, Chief Counsel Operations, MIGA's Legal Affairs and Claims Group said.

MIGA, he says, has sponsored and extended similar facilities to cover local investments in conflict zones like Afghanistan, West Bank and Gaza, Bosnia and Herzegovina and Kosovo.

The crux of the proposal is around 40 million dollar guarantee facility funded by the World Bank and other donors, who will leverage the insurance capacity of local investors.

MIGA can cover expansion of new investments, debt as well as equity and business interruption.

If there is a default of a bank loan, payments can be made out of the fund.

MIGA was in a position to cover loan portfolios. A cluster of loans could be grouped into one major loan. MIGA can cover both existing and future loans but only against political risks, Perera s