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| Sunday, 18 May 2003 |
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Central Bank Annual Report : Peace, fiscal discipline and policy reforms key to economic growth Lasting peace, strict fiscal discipline and vigorous policy reforms are key to accelerate economic growth and achieve long-term growth. According to the recently released Central Bank Annual Report 2002, even though Sri Lanka was the first country in South Asia to adopt open economic policies, it cannot be complacent about its achievements over the past 25 years, as the growth momentum maintained during this period has been below the country's long-term growth potential. The destructive civil war together with the failure to pursue the economic reforms programme vigorously was a major cause for such an undesired outcome. Therefore, the correct identification of past mistakes would help the country map out suitable strategies for accelerating economic growth in the future. Civil disturbances, emerging macroeconomic imbalances as well as the slow progress of the economic reforms held back the performance of the country during the last quarter of the 20th century. Peace Economic growth and peace are highly inter-related. Sri Lanka's future economic performance would depend heavily on whether the country would achieve peace. The gains would be completely different if the country continues a no war/no peace situation or reverts to war. Attaining a durable peace within a sustainable constitutional arrangement is essential to achieve the high growth necessary to alleviate poverty on a more sustainable basis. Strong commitments from all parties involved and building up consensus gradually on difficult and complex issues are essential in achieving it.Increased domestic and international support has further strengthened the peace process, indicating that it is moving in the right direction. At the same time, the acceleration of rehabilitation and reconstruction activity is critical to further strengthen domestic support. The proposed donor group meeting scheduled for next month in Japan will provide an ideal opportunity to mobilise external financing. Therefore, every effort must be made to mobilise the maximum amount of resources at the forthcoming meeting not only for North and the East, but also to develop infrastructure facilities in other parts of the country which were neglected in the past. The international community has indicated its willingness to support the peace process strongly and also provide a large amount of concessional financial assistance for rehabilitation, reconstruction and development of the whole country. "Sri Lanka should not miss this opportunity, but the realisation of maximum benefits from this goodwill will depend entirely on the commitment, unity and ability of all Sri Lankans," states the report. Cross-roads The country is presently at cross-roads. The major challenge facing it is moving on all three fronts simultaneously; moving forward in the peace process, providing relief, implementing rehabilitation and reconstruction activity as well as accelerating economic growth through productivity improvement and capacity expansion by implementing structural reforms effectively. |
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