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Lankan economy to grow by 6.5 per cent

world Updated: May 21, 2010 18:48 IST
Sutirtho Patranobis

Sri Lanka’s economic outlook is improving and its economy could register a strong growth in 2010, the International Monetary Fund (IMF) said on Friday.

The IMF, among the organisations and countries funding Sri Lanka’s post-war development programmes, forecast that its gross domestic produce (GDP) could grow by a healthy 6.5 per cent this year.

An IMF team here was encouraged by the assessments for the release of third tranche of the $2.6 billion loan to Sri Lanka.

In fact, talks with local officials were encouraging enough for the top financial body to indicate that the third tranche of its program loan to Sri Lanka in could be released in four-six if its management and board were satisfied with the island's budget deficit for 2010, an official, was quoted by Lanka Business Online has having said on Friday.

Sri Lanka has so far received two tranches of the loan totalling $658.8 million and discussions are on for the third installment of $320 million.

"Policy talks were encouraging," visiting IMF mission chief Brian Aitken told a news conference following meetings with government officials.

"There is scope for the government to cut recurrent expenditure and raise revenue," Aitken said.

The revenue enhancement measures are expected to come from ongoing tax reforms which are to broaden to the tax base and to simplify the system, he said.

Reducing the budget deficit is necessary to prevent macro-economic instability, Aitken said.

An IMF team led by Aitken also visited Jaffna this week o check for themselves the post-war economic revival of the northern-most part of the country, which was largely isolated during the decades of ethnic conflict.

The team, according to the Press Trust of India, discussed with top government officials the welfare of the internally displaced persons (IDPs), projects to restore their livelihood and development of crucial infrastructure in the war-ravaged northern areas.