Programme launched to ensure steady economic growth - Minister

SINGAPORE: Sri Lanka's economy is displaying great resilience despite many challenges, said Public Administration and Home Affairs Minister Dr. Sarath Amunugama.

"A broadbased GDP growth of seven to eight per cent is expected in 2006. We have launched a programme to ensure a steady growth of around eight per cent to achieve sustained growth with social justice and equity. Our government has responded appropriately to sustained sharp rises in oil prices," the Minister said at the IMF World Bank meeting in Singapore on Tuesday.

Dr. Amunugama said oil subsidies, which had been an enormous burden on the budget, have been eliminated.

"These price adjustments, in the context of growing domestic incomes and investment activity, have led to some upward price pressure. We are committed to strengthening macro economic stability. In this regard, the process of fiscal consolidation is under way.

The Central Bank has appropriately tightened monetary policy. We have also strengthened our financial systems to maintain international best practices. Laws to counter money laundering and the financing of terrorist activities have been strengthened and an FIU is now fully operational," the Minister said.

Dr. Amunugama said President Mahinda Rajapaksa has reiterated the Government's commitment to a peaceful resolution of the long-standing conflict in the country and has called upon the LTTE to renounce violence and enter into negotiations.

He said the global economy has continued to perform strongly and the growth has become more broadbased since we last met in Washington DC.

"However, we are concerned about continuing high risks and vulnerabilities. The consequences of large global imbalances that loom over us feed instability. The high oil prices have had a severe impact on oil importing countries like my own.

Despite the recent reductions, future price directions remain quite uncertain.

There are signs of emerging inflation, although major countries and regions have moved swiftly to meet this challenge.

International developments clearly demonstrate that if the global economy is to maintain steady growth, a co-operative effort from all players, in particular the major ones, is badly needed," the Minister said.

Dr. Amunugama said a highly successful Commonwealth Finance Ministers' meeting concluded in Colombo last week.

"The main theme was 'An Agenda for Growth and Livelihood' and there were many related topics, including Fund-Bank issues.

There was a clear recognition that good economic policies matter for raising and sustaining growth and improving livelihood.

In addition, among the many important recommendations the Ministers made was the need for development partners and multilateral institutions to align support behind national strategies, and to ensure that aid programmes are locally relevant, cost effective and institutionally feasible," he said.

Dr. Amunugama added: "We, in Sri Lanka have always been of the view that organisation like the International Monetary Fund and the World Bank have a significant role to play in sustaining global economic growth and strengthening stability.

Hence, we welcome the multilateral consultations that have been initiated recently. We also support the focus on increased surveillance in the Fund's medium term strategy. Such surveillance would help identify weaknesses and reduce the possibility of crises.

"The efforts of the Bretton Woods Institutions to help countries achieve the Millennium Development Goals is appreciated. In line with one of the Fund's basic purposes of helping countries encountering balance of payments difficulties, we reiterate our call for the creation of a special medium term oil facility to assist countries that have been adversely affected by the sharp increase in oil prices.

"Further, while welcoming the initiatives to assist low income countries, it is also important to consider the needs of those countries which have successfully moved into the middle income group.

"The legitimacy and credibility of the Bretton Woods Institutions need to be improved for them to continue to play an effective role in the world economy.

While we fully support and appreciate the increase in quota for China, Korea, Mexico and Turkey, we are reassured by the Managing Director's statement that this is the first step of a more fundamental reform in the governance of the Fund, based on a broadly acceptable change in voice and representation," he said.