The money will be used to improve downstream irrigation infrastructure of the Iranamadu reservoir in Kilinocchi in the north of the island.
To respond to the needs of smallholder farmers in the Kilinochchi district of the Northern province, the project will improve the downstream irrigation infrastructure of the Iranamadu reservoir.
"The reservoir, which has not been maintained adequately for many years, will be rehabilitated to increase its water-holding capacity," IFAD said in a statement.
"The project is expected to benefit about 7,000 households.
Asitha Perera Sr Lanka's ambassador to Rome and IFAD chief Kanayo had signed the loan agreement Tuesday.
The project will also teach farmers water saving methods, rainwater harvesting.
"This will enable them to use irrigation water more efficiently for sustaining their crops and contract farming," IFAD said.
"Women™s groups would also be formed and strengthened by offering training and development of vegetable produ