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| Sunday, 2 May 2004 |
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Sri Lanka's economic prospects promising- CB report Sri Lanka's future economic prospects appear to be promising, provided the policy challenges are met effectively, creating an environment conducive to sustainable high quality economic growth and reducing the risks involved, by the government, according to the Central Bank (CB) report. The Central Bank annual report, released last week stated that the continuation of the peace process, implementation of economic policy adjustments and deepening the structural reforms should be at the top of the government agenda. However,Sri Lanka's economy recorded a real GDP growth of 5.9 per cent in the year 2003 compared to 4 per cent in 2002 mainly due to the macroeconomic stability in the country, according to the report. This favourable growth rate was achieved through a continuation of the ceasefire agreement, sound macroeconomic management, deepening structural reforms and through the strengthening of the international support. The report further revealed that the proper management of monetary policy along with low interest rate by the Central Bank helped curtail the country's inflation to a great extent. The Fiscal Management (Responsibility) Act helped to maintain the fiscal disciplines to a great extent, while enhancing the government revenue mobilisation, rationalise expenditure, improve deficit financing and strengthen public debt management. The improvement in macroeconomic management and the deepening of structural reforms created an environment conducive to economic recovery. This was achieved by strengthening investor confidence, encouraging foreign investment inflow, improving efficiency in the economy and enhancing external donor support - approval of a highly concessional assistance package under the Poverty Reduction and Growth Facility from the IMF and the Poverty Reduction Support Credit from the World Bank. On the production side, there was a 5 per cent growth in main sectors including service, industry, and agriculture. The Gross Domestic Product grew by 5.9 per cent in 2003, while Gross National Production grew by 6.4 per cent the report stated. The major production sectors contributing to this growth were paddy, manufacturing, trade, telecommunication,power, financial services, tourism, port and aviation and construction. According to the report, capital formation picked up, increasing to 22.4 per cent of GDP, and national savings rate to 21.3 per cent of GDP, thus enabling more job opportunities and reduction of the inflation. It is reported that reduced deficit and increased foreign financing decreased the government's net domestic borrowing significantly, enabling the government to reduce its overall debt to the banking sector. In terms of trade there was a 7.4 per cent increased despite increased petroleum prices. The reduction in the current account deficit to around 0.6 per cent of GDP and the improvement inflows in the capital and financial accounts helped to achieve a surplus (US dollars 502 Million) in the balance of payment for the third consecutive year, the report states . It is incumbent upon the government to continue with the sound macroeconomic management centred on the medium term fiscal sustainable strategy to be supported by effective implementation of economic reforms and development of infrastructure facilities, particularly power and transport, improvement in law and order, strengthening political stability, effective utilisation of foreign donor assistance and harnessing the emerging favourable external environment for the benefit of the country. |
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