Sri Lanka faces bleak economy, to meet donors

By Nirupama Subramanian

COLOMBO, DEC. 10. Sri Lanka will go into a crucial meeting with donor countries later this month against the background of a gloomy outlook for the country's economy that speculation about peace talks with the LTTE has done nothing to lift.

The Deputy Finance Minister, Mr. G.L. Peiris, has told the State- run Sunday Observer that the focus of the meeting to be held on December 18 and 19, will be the rehabilitation of the embattled north, poverty alleviation and good governance.

The Sri Lankan President, Mrs. Chandrika Kumaratunga, may also attend the Paris aid-group meeting with donor countries, where, it is expected, she will face pressure to quickly begin talks with the LTTE.

The LTTE leader, Mr. Velupillai Prabhakaran, last month accused the international community of funding the Sri Lankan Government's war against him.

``It is because of the massive financial aid obtained from donor countries that Sri Lanka can continue this war against the Tamils,'' he said in his annual `Heroes' Day' speech.

It was in the same speech that the LTTE leader offered peace talks. Last week, Mr. Peiris faced questions from diplomats of the Paris group donor countries on how the Government would respond to this offer. He said the Government was ``ready to take the bull by the horns''.

``We are at the threshold of a historic period. We have to take difficult decisions and we will not shirk them,'' he reportedly said.

His remarks, and the prolonged stay of the President in the U.K., have fuelled speculation that peace talks may be around the corner, even though there are few positive signs yet.

The weekly Sunday Leader said today that the LTTE's Mr. Anton Balasingham had unofficially conveyed to the Sri Lankan Government the demand he made at a Tamil public meeting in London last month, that talks could not begin till Colombo lifted the ban on the group, and stopped lobbying Western nations also to proscribe it. The newspaper said the Government's demand that the LTTE publicly declare it had given up its demand for Eelam constituted another snag.

If the defence outlay for the first four months of 2001 is any indication, the Government is not being overly optimistic about chances of peace. An interim budget for January to April 2001, passed in Parliament last week, allocated Sri Lankan Rs. 26 billions ($ 1=SLRs 83) for defence spending, which is 20 per cent of total spending for that period.

Sri Lanka's defence expenditure rose dramatically after an escalation in the war against the LTTE in mid-2000, turning the initial allocation of Rs. 52.4 billions for this year upside down, and sending it soaring over the $ 1 billion mark.

Mr. Peiris said in Parliament earlier this week that the unforeseen escalation had resulted in a bigger budget deficit than the projected 7.6 per cent. The revised estimate is now 8.7 per cent.

Recent weeks have seen the Government borrowing frantically to pay off oil bills and prop up its defence spending, putting pressure on interest rates, currently at over 20 per cent, up from 12.5 per cent at the beginning of this year.

The rising interest rates forced the Government to come out with denials of rumours of the economy's imminent collapse. The country has adequate reserves. Sri Lanka's central bank said last week that the projected growth rate for 2000 was 6.1 per cent, against 4.3 per cent last year.

Send this article to Friends by E-Mail

Section  : International
Previous : 'Britain to freeze Benazir's assets'
Next     : Australia's stress on Asia-Pacific ties