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| Sunday, 26 May 2002 |
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| News Business Features Editorial
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Peace
process, economic reforms key to higher growth rate - IMF
by SUREKHA GALAGODA The International Monetary Fund (IMF) is confident that Sri Lanka can achieve a six per cent growth rate in the medium term. Deputy Managing Director of IMF Shigemitsu Sugisaki, who was in the island on a two-day official visit, said the country can achieve a higher growth rate and reduce poverty in the medium term if the peace process and economic reforms are tackled together. "The economy is picking up after the difficulties of last year and we hope this will continue. The country's target growth of 3.5 to four per cent is encouraging, but is not enough to combat poverty. Therefore, the country should look at a higher growth rate which could be sustained through a period of time," he told a media briefing in Colombo. The immediate agenda of the country should be achieving the target of bringing down the fiscal deficit to eight per cent of GDP, reducing inflation and accelerating reforms. He hoped the country would be able to bring down the fiscal deficit without any fiscal slippages. Mr Sugisaki said that establishing the Revenue Authority and restructuring the banking sector are vital for economic stability while deregulation and labour market reforms will pave the way for higher economic growth and more opportunities for employment. There are a number of loss making corporations that should be restructured. The agenda is enormous and the country needs solidarity to implement the difficult economic reforms. This will go hand-in-hand with the peace process. Sugisaki said the private sector wants more opportunities for investment and are keen to make business decisions based on commercial viabilities sans constraints. The private sector still feels that there are some constraints for doing business, he said. He said: "We are very happy that the Government is taking correct the measures to strengthen economic reforms; they are determined. Our role is to give advice and recommendations as the final authority is with the Government." Mr Sugisaki said the Finance Ministry is keeping the fiscal house in order despite pressures from several groups for higher spending. The Government is also making it clear that its presence will be reduced wherever the private sector is willing to come in. Expressing his views on the peace process, he said: "We are very happy that the peace process is moving forward. It will boost the confidence of investors both international and local." He said further concessionary funding can be considered only after the Government successfully implements the requirements under the US$ 253 million Stand By Arrangement (SBA). The SBA was negotiated by the previous regime and after the release of the first tranche, it was halted. When the UNP came to power, they renegotiated the facility and a further US$ 60 million was released. The balance US$ 60 million will be disbursed after discussions are completed in the summer, he added. A team of IMF officials will be in the country next month to evaluate the performance. Mr Sugisaki said that the current SBA was an emergency response to get over the financial difficulties faced by the country last year. "Once the SBA is completed, we can discuss the Poverty Reduction and Growth Facility, the concessionary lending window of the IMF." He said the next programme will make the economy more efficient and the agenda will be broader and deeper than the current programme. It is premature to say how much funding will be given to Sri Lanka. About his first visit to the country, he said: "I have come here at the right time. The momentum is here." He said that he was in Sri Lanka to acquaint himself with the developments in the country. Sugisaki met President Chandrika Bandaranaike Kumaratunga, Prime Minister Ranil Wickremesinghe, Minister of Finance K.N. Choksy, Minister of Economic Reforms Milinda Moragoda, officials of the Central Bank, trade chambers and representatives from the private sector and civil society. IMF Sri Lanka on the Web The IMF Sri Lanka Office website was inaugurated last week by Deputy Managing Director of IMF Shigemitsu Sugisaki. The site can be accessed at www.imf.org/colombo. The website provides information on the activities of IMF's resident representative office in Sri Lanka. It is linked to documents on IMF relations with Sri Lanka in addition to a wide range of material published by the IMF. Given the rapid use of the Internet and the increasing demand for printed material by the public in Sri Lanka, the IMF hopes that this site will provide a useful means of disseminating information about the activities of the IMF office in Colombo, said the Senior Resident Representative of IMF in Sri Lanka Dr Nadeem Ul Haque. |
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