Large scale infrastructure projects will continue despite terrorism - President

‘Country and economy will be protected’:

By Surekha Galagoda

[email protected]
 

President Mahinda Rajapaksa said the government will continue to invest on large scale infrastructure projects while eradicating terrorism whatever challenges or problems we have to face as we are bound to protect the country and the economy.

President Rajapaksa who is also Finance Minister was speaking at the presentation of the 58th Central Bank Annual Report for 2007.

The President said that by showcasing a problem of human rights some quarters are trying to stop the special tax concessions such as GSP+ which the apparel sector enjoys when they export to the European Union.

We know that there are some politicians and supporters of terrorists who are behind this move.

We as a government are trying our best to get the concessions but it will not be at the stake of our country’s sovereignty. Therefore, for some reason if the apparel sector doesn’t get the benefits they will have to increase productivity and learn to face the challenges.

The country is faced with the dual challenge of maintaining a high growth rate while passing on the benefits to the rural folk which has to be done parallel.

In addition we have the challenge of wiping out terrorism from this country. The President paid tribute to all who sacrificed their lives including Minister Jeyaraj Fernandopulle. He said that if somebody were to think that these will scare us they are wrong as we will never step back.

Governor of the Central Bank, Ajith Nivard Cabraal said that globally too economies are in crisis due to the sub prime crisis and the turmoil in the financial markets which has put several banks in trouble. The Bank of England had to provide 37 billion sterling pounds to save the United Kingdom’s Northern Rock bank from crashing.

He said that last year the economy recorded a growth of 6.8 per cent for the third consecutive year for the first time since Independence, demonstrating that the country has now moved on to a higher growth path of above 6 per cent per annum from the historic average of around 4-5 per cent.

The annual average rate of unemployment reached its lowest ever recorded level of 6.0 per cent, while the per capita income rose further to US dollars 1,617 in 2007.

This performance is commendable, as it was achieved in a challenging environment of heightened security concerns arising from intensified terrorist activities and rising petroleum and commodity prices in international markets which threatened the achievement of price stability.

He said that the economic growth in 2007 was mainly driven by the performance in industry and services sectors which grew by 7.6 per cent and 7.1 per cent, while the agriculture sector grew moderately by 3.3 per cent.

The services sector made the biggest contribution of 62 per cent to overall growth, while the industry and agriculture sectors contributed 32 per cent and 6 per cent. The shares of GDP from the services, industry and agriculture sectors remained almost unchanged at 60 per cent, 28 per cent and 12 per cent.

The Governor said that in 2007, most of the sub-sectors in agriculture achieved relatively high growth rates except for tea and paddy.

Tea production decreased by 2.0 per cent to 305 million kilograms, while paddy production declined by 6.4 per cent to 3.1 million metric tons. Continuous efforts to enhance the quality of Sri Lanka’s tea, higher global demand and increased value addition led tea prices to rise well above the global average price, offsetting the decline in production in 2007.

Rubber production benefited from attractive prices, combined with the adoption of new technologies. Coconut production rose by 3.0 per cent during the year benefiting from favourable weather conditions but the prices of coconut and coconut based products increased sharply reflecting the world trend of increasing demand for organic oils to produce bio-fuel as a supplement to expensive fossil fuel.

Director of Economic Research Dr P.N. Weerasinghe said that more efficient provision of services by State Owned Enterprises (SOEs) without being a burden on the public is a prerequisite for macroeconomic stability.

A major source of macroeconomic imbalance has been arising from inefficient operations of SOEs, in providing utility services such as electricity, water, transport services, petroleum products and marketing services such as purchasing paddy and selling essential commodities through state owned marketing networks.

Such SOEs burden the public by their reliance on budgetary financing or bank borrowings.

In addition to the policy of non-privatisation of existing enterprises, there is a recent trend of the government venturing into new SOEs or reviving hitherto troubled SOEs, eg., Mihin Air, the Central Transport Board (CTB), Paddy Marketing Board, Co-operative Wholesale Establishment (CWE) and Co-operative marketing networks.

It is essential that proper governance and pricing structures are established in managing those SOEs if they were to achieve the intended objectives through commercially viable operations without relying on government subsidies.

Dr. Weerasinghe said that bringing down inflation to a single digit from the current high levels would be a challenging task in view of rising commodity prices in international markets.

The Central Bank in its “Road Map for Monetary and Financial Sector Policies for 2008 and beyond” has announced strategies to bring down the inflation rate to around 10-11 per cent by end 2008.