War Risks Dim Sri Lanka Economic Prospects
Agence France Presse
April 6, 2006
The risk of Sri Lanka returning to full-scale hostilities despite a four-year-long ceasefire with Tamil rebels is stunting economic growth and investment, the Asian Development Bank said.
In its Asian Development Outlook released Thursday, the Manila-based ADB forecast Sri Lanka's economy will grow 5.3 percent this year and 5.2 percent in 2007, which it says is "a respectable performance."
Sri Lanka itself expected a higher growth rate of over six percent for 2006, compared to a provisional 5.9 percent in 2005 and 5.4 percent in 2004.
The ADB's more conservative projections are based on the assumption that there is no return to open hostilities with the Tamil Tiger rebels.
"In terms of risks to the outlook, the situation of the civil conflict is the main one," the bank said referring to the decades-old separatist conflict which had caimed 60,000 lives until a truce in 2002.
Political negotiations between Colombo and Tamil Tiger rebels remain on hold since April 2003.
However, peace broker Norway arranged a round of talks in February to discuss the truce which came under pressure following a spike in violence between December and January. Another round is scheduled for later this month.
"There is a considerable risk that hostilities could resume at a high level of intensity that might, in the worst case, lead to a full scale conflict," the ADB said.
That both sides have agreed to continue the dialogue, tentatively fixed for April 19-21, "offers grounds for some optimism," it added.
Sri Lanka is also facing a difficult environment both in terms of political developments and macro-economic management, the bank said.
A complex political and social structure, combined with civil strife and a strong commitment to a welfare state, has made it difficult for successive governments to push through unpopular but vital changes.
President Mahinda Rajapakse, elected last November with the backing of Marxist, socialists and Buddhist monks, has stopped privatisation, pledged more farm subsidies and blocked attempts to raise prices of electricity and fuel.
Rajapakse, who is also finance minister, has yet to articulate plans to translate his election manifesto into economic plans and structural reforms may proceed in a diluted form or in some cases may even be reversed, the bank said.
Copyright © 2006 Agence France Presse
April 6, 2006
The risk of Sri Lanka returning to full-scale hostilities despite a four-year-long ceasefire with Tamil rebels is stunting economic growth and investment, the Asian Development Bank said.
In its Asian Development Outlook released Thursday, the Manila-based ADB forecast Sri Lanka's economy will grow 5.3 percent this year and 5.2 percent in 2007, which it says is "a respectable performance."
Sri Lanka itself expected a higher growth rate of over six percent for 2006, compared to a provisional 5.9 percent in 2005 and 5.4 percent in 2004.
The ADB's more conservative projections are based on the assumption that there is no return to open hostilities with the Tamil Tiger rebels.
"In terms of risks to the outlook, the situation of the civil conflict is the main one," the bank said referring to the decades-old separatist conflict which had caimed 60,000 lives until a truce in 2002.
Political negotiations between Colombo and Tamil Tiger rebels remain on hold since April 2003.
However, peace broker Norway arranged a round of talks in February to discuss the truce which came under pressure following a spike in violence between December and January. Another round is scheduled for later this month.
"There is a considerable risk that hostilities could resume at a high level of intensity that might, in the worst case, lead to a full scale conflict," the ADB said.
That both sides have agreed to continue the dialogue, tentatively fixed for April 19-21, "offers grounds for some optimism," it added.
Sri Lanka is also facing a difficult environment both in terms of political developments and macro-economic management, the bank said.
A complex political and social structure, combined with civil strife and a strong commitment to a welfare state, has made it difficult for successive governments to push through unpopular but vital changes.
President Mahinda Rajapakse, elected last November with the backing of Marxist, socialists and Buddhist monks, has stopped privatisation, pledged more farm subsidies and blocked attempts to raise prices of electricity and fuel.
Rajapakse, who is also finance minister, has yet to articulate plans to translate his election manifesto into economic plans and structural reforms may proceed in a diluted form or in some cases may even be reversed, the bank said.
Copyright © 2006 Agence France Presse
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