A Mixed Bag for 1997

Sri Lanka's economy in 1996 was pounded by soaring defence spending, power cuts and political unrest. Why, then, are the planners bullish about the coming year.

Planners in Colombo´s Central Bank say that the Sri Lankan economy should rebound in 1997. They are pinning their hopes on recent victories scored against the Tamil rebels on the ground coupled with less capital expenditure anticipated for defence, and a general improvement in investor and market sentiments. According to R.A. Jayatissa, head of the Bank´s economic research unit, the inflation rate, GDP growth and the balance of payments will require close scrutiny in the months ahead. "Our primary target is to achieve sustainable GDP growth of at least seven percent from 1998 onwards and contain inflation to about six percent."

To do that, the country´ must achieve intermediate targets, such as money supply growth of about 16 percent, compared to the current 12 percent, and reduce the budget deficit to 7.3 percent of GDP in 1997. GDP growth is expected to dip to about 4 percent in 1996, down from 5.5 percent in 1995 and 5.6 percent in 1994.

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Himal Southasian