Steady progress in power sector reforms

Reforms in the power sector have seen steady progress but we understand the difficulty in proceeding with the power sector reforms, said Director Loan Aid Division, Economic Cooperation Bureau, Japanese Ministry of Foreign Affairs Koichi Aiboshi.

He led a six-member Official Development Assistance (ODA) delegation to the country to appraise the government of Japan's ODA to Sri Lanka especially the yen loan projects.

Aiboshi said that he was happy that some reforms were taking place at the People' Bank too. Tax collection has been revised and we are happy with the progress as the government is planning to achieve a tax income of 18 percent of GDP in four years.

"We are happy with the government's Macro policy management and are closely following the medium term budget sustainability. We also discussed the government's borrowing policy as we are concerned whether it will undermine the medium term debt sustainability of the government", he said.

Once the development plan based on the Mahinda Chinthanaya is finalised within the next few months there will be another round of discussions between the line ministries, JICA, JBIC and JETRO to get an understanding of what projects needs funding before we come to Sri Lanka in September.

During their meeting with donor agencies such as IMF and ADB they noted that these organisations were more positive towards the Sri Lankan economy though they are not fully satisfied.

Aiboshi said "Sri Lanka is providing some cooperation although it is not satisfactory." He said that Sri Lanka has done a good job managing its economy despite facing a host of difficulties such as rising oil prices, impact of the tsunami, phasing out of Textile quotas and troubles in the peace process.

Last year Sri Lanka received Rs. 19.4 billion as assistance under the ODA which was allocated for the first phase of the Galle port development project, pro poor eastern infrastructure project and the Tourism resources improvement project.

This year we have still not decided how much we are lending as this will be based on the Sri Lankan government's requirements and several other factors.

He said that in the event a project is not completed within the scheduled timeframe we only consider the option of extending the loans' validity.