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Tiding over G.S.P.+ loss

Sri Lanka’s economy is targeted to grow at 6% of g.d.p. next year despite the elections, an economist said.
A.D.B. Lead Economist in Colombo Narahari Rao speaking to reporters on Monday however said the economic policies that the government would follow after the elections were critical for the country’s future economic performance.
He expected elections to dominate the island’s landscape till April and the possibility that growth may advance to 7% or even higher in 2011.
The A.D.B. expects the economy to grow by between 4-4 1/2% this year.
Rao further said that the I.M.F.’s standby arrangement rests on three pillars: Reducing the budget deficit to 5%, increasing reserves by internal generation and not by borrowings and enhancing revenue collection and better expenditure management.
He said that reducing the budget deficit would help to release funds for the private sector, while at the same time it would assist in controlling inflation.
A.D.B. Country Director Dr. Richard Vokes said that if the country, with a war on, was able to record an annual average growth of 5%, achieving a growth of 6% plus in the post war period was something that was not impossible.
He also said that it had been estimated that the war had been knocking off 2% of the country’s g.d.p. Therefore even an 8% growth rate is a possibility, said Vokes.
Rao said that in their projections, they have had in part factored in the possible loss of the G.s.P. + concession.
However with investments and tourism picking up in the post war period, A.D.B. was optimistic that Sri Lanka would be able to ride the storm, in the event that concession was lost.
Vokes said that post war, they were getting calls from banks, inquiring about the situation in Sri Lanka.
He said that the world appeared to be getting out of the recession, vital for Sri Lanka’s export and tourism growth.
Rao, referring to foreign investments in rupee denominated Treasury Bonds and Bills said that 6-7% months ago, no matter what the interest offered was, it was difficult to get foreigners to subscribe to rupee denominated government securities. But now the situation was different.

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