ZCZC
BCN-14
SRILANKA-ECONOMY-BANK
Sri Lanka economic growth slowest in 17 years – central bank
COLOMBO, Feb 23, 2019 (BSS/AFP) – A political crisis in Sri Lanka last
year led to the slowest economic expansion in 17 years, the central bank said
Friday.
Growth for 2018 was cut from a forecast above 5.0 percent to about 3.0
percent because of damage to the economy from a conflict between the
president and prime minister, Central Bank of Sri Lanka governor Indrajith
Coomaraswamy said.
President Maithripala Sirisena sacked Prime Minister Ranil Wickremesinghe
in October and dissolved parliament even though he did not have a majority to
back the move. The showdown was only ended by the Supreme Court in December
when it held that Sirisena’s actions were unconstitutional and illegal.
The bank governor said he expected better growth in 2019 as the outflow of
foreign capital had reversed.
“All in all, we are in a better place this year,” he said, warning however
that there could be fiscal slippage because the government was likely to
offer sweeteners to the people during a presidential election this year.
Coomaraswamy noted that Sri Lanka’s Supreme Court had demonstrated its
independence underscoring that key institutions functioned despite the
crisis.
“Our systems stood up very well in the last few months,” Coomaraswamy told
reporters. “But businessmen have concerns about political stability.”
During the crisis, three international credit rating agencies downgraded
the country’s debt, making it more expensive to borrow abroad.
Sri Lanka had to abandon plans to raise loans abroad. An International
Monetary Fund programme was also suspended, though the government has opened
talks to revive the three-year $1.5 billion bail-out which began in 2016.
The 2018 growth compares with 3.1 percent in 2017 when the country faced
the twin effects of a major drought followed by floods that killed more than
210 people.
The economy contracted by 1.25 percent in 2001 after Tamil rebels
devastated half a dozen aircraft at the country’s international airport
dealing a major blow to tourism, a key foreign exchange earner.
The economy has been performing well, however, since the end of a decades-
long Tamil separatist war in 2009.
BSS/AFP/HR/1005