The loan is the first tranche of a USD 453 million multi-tranche financing facility to help Sri Lanka complete its ongoing drive to deliver surplus water from the Mahaweli river basin to its dry zone, where scarce supplies undermine agricultural output and household incomes, it said.

ADB's country director in Sri Lanka Sri Widowati signed the loan agreement on behalf of the ADB and Secretary to the Ministry of Finance Dr. R.H.S. Samaratunga signed for the Sri Lankan Government..

"Lack of year-round access to water resources constrains the agricultural and commercial production of the region, suppressing social and economic development," said Sri Widowati.

The funds will be used to construct 6.2 kilometers of open canals and associated structures of the Upper Elhahera Canal, two new reservoirs, namely Mahakitula and Mahakirula, and 27 kilometers of open canals linking the new reservoirs with the existing Wemedilla reservoir.

A 940-meter tunnel of the North Western Province Canal will also be built with the funds.

The Mahaweli Water Security Investment Program aims to accelerate economic activities in Sri Lanka's northern dry zone region by transferring surplus water of the Mahaweli river basin for irrigation, drinking, and commercial purposes, the statement said.

It will also develop bulk water conveyance and storage infrastructure planned under the North Central Province Canal Program (NCPCP), the ADB said.

"This is a high priority development program of the government that will support completion of the Mahaweli Development program which started in 1970," the statement said.