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Tuesday, August 24, 2010

Sri Lanka’s economic growth to double: IMF

* Head of IMF mission to Colombo says island’s economy will grow by 7% this year, up from 3.5% in 2009

COLOMBO: Sri Lanka’s economic growth rate is expected to double this year, with the country firmly on the road to recovery after decades of ethnic war, a top International Monetary Fund official said Monday.

The island’s economy will grow by seven percent this year, up from 3.5 percent in 2009, thanks to improved farm output in the previously embattled north and east, forecast Brian Aitken, head of the IMF mission to Colombo.

The strong economic performance meant there would be no difficulty for the IMF in releasing the fourth tranche of a $2.6 billion bailout approved in July 2009, Aitken said.

“We feel things are quite good,” Aitken told reporters following a 10-day visit to the island.

“We are in a position to recommend to the IMF board approval of the next (loan) installment worth over $200 million,” he said. With that payout, the IMF will have released $1.2 billion of the loan.

Sri Lanka sought an IMF bailout to avert its first balance of payment crisis after the island’s foreign reserves slipped to under a billion dollars last year.

The loan was approved in July, two months after the military crushed the Tamil Tiger rebels and ended a 37-year conflict that claimed up to 100,000 lives, according to UN figures.

Aitken said the government has shown progress in cutting spending and boosting revenue to ensure that the budget deficit stays on track at eight percent of GDP this year.

He said Sri Lankan authorities have promised to raise tax revenues, cut spending and step up fiscal reforms when the 2011 budget is announced in November.

“To do that, tax reform is needed — to simplify the existing system, broaden the tax base, including restricting concessions and to spread the tax burden more equitably to support economic growth,” Aitken said. Since the IMF bailout, Sri Lanka’s foreign reserves have swelled to a record $5.8 billion, boosted by international investor interest in the island’s sovereign bonds.

The central bank expects foreign reserves to hit $6.2 billion by the end of 2010.

Aitken said Sri Lanka planned to issue in September a 10-year $1 billion euro bond whose proceeds would be earmarked for infrastructure and other purposes.

source - www.dailytimes.com.pk