IMF, World Bank must review emerging economy strategies - Dr. Amunugama

THE time has now come for both IMF and World Bank to critically review their long-followed strategies relating to emerging economies, Enterprise Development & Investment Promotion Minister Dr. Sarath Amunugama told the World Bank/IMF Annual Meeting in Washington. DC.

“Past development strategies adopted by these institutions by supporting public initiatives have overburdened many Governments with fiscal constraints and ever-rising debt ratios.

Instead, as an alternative, we should look for new development strategies which harness the possibilities of private initiatives for sustainable development,” Dr. Amunugama said.

This could be achieved through public private partnerships, also known as the PPP model, for development. Donors, specially the World Bank and its subsidiary IFC, could facilitate this process by linking their country programs to such home driven strategies, he added.

“Financial globalisation, which has brought about many benefits through an efficient allocation of international savings, can also be a source of vulnerability for small nations like Sri Lanka.

In view of such circumstances, it is in our interest to call for increased surveillance of the financial sectors of countries, particularly the large advanced economies, by both domestic regulators and the international lending organizations.”

Focusing on Sri Lanka, the Minister said the unprecedented high price of oil in international markets has taken a heavy toll. Volatility in major markets and any slow down in world output would certainly bring about a deleterious impact on our economy. Rising food prices is also a significant challenge.

“Despite the challenges we face, our economy grew strongly, by 7.4 per cent, last year. The Lankan Government is committed to fiscal prudence and sound macro economic policies. We appreciate the need for continued investment to sustain our economic growth and to eradicate poverty.”

The Minister noted that in 2006 Sri Lanka received the highest ever foreign direct investment inflows. The Government was taking measures to reduce poverty and bring about broad based, regionally equitable economic growth.

Sri Lanka was recently able to make a successful debut bond issue, which was over subscribed by more than three times, and is a mark of confidence in the resilience of our economy.

This has paved the way for the Sri Lankan private sector to tap this global market for infrastructure development, the Minister observed.

“In the sea around Sri Lanka, a vast off-shore oil field has now been discovered. There has been considerable international interest in the venture and bidding will begin early next year.”

He stressed the need for economic policymakers everywhere to be vigilant and willing to take concerted action to ensure that the dynamism experienced by the world economy is continued and its growth momentum maintained.