Growing economic prospects:

Bright future for Sri Lanka

Philip FERNANDO

Sri Lankan economy continued to expand in the four months since Government forces defeated the Liberation Tigers of Tamil Eelam (LTTE), ending 25 years of terrorism and conflict.

Many sectors have shown signs of quick recovery, especially tourism. Country visits leapt forward in July, and plans to expand hotels and resort facilities, especially in areas once controlled by the LTTE, promise to draw more tourists to the island. Despite the worldwide recession, investor confidence in Sri Lanka has remained strong in a number of sectors.

The country's gross official reserves surpassed the US $4 billion mark on September. 10. This level of reserves is equivalent to over 4.4 months of imports and it is Sri Lanka's highest ever reserves level.

The Central Bank reported that renewed investor confidence and the steady increase in foreign exchange inflows means that the country's external reserve position is expected to strengthen further in the coming months. The Colombo Stock Exchange (CSE) surged to its highest level since May 2007, with shares in the tourism sector driving demand and outpacing the market's 2009 growth by more than two-to-one. The hotels and travel index hit an all-time high of 2,548.34 points with a three percent gain. It is up 167 percent in 2009, more than double the overall market's noteworthy return of 81.3 percent. The CSE reported high on September 8, 2009 was 2,724. Turnover was reported at a two-week high of Rs. 1.1 billion ($9.61 million), more than twice the 2008 daily average of Rs. 464 million. The CSE is one of this year's best performers among Asia's recovering economies. It has risen nearly 43 percent since the May conclusion of the 25-year conflict with the LTTE.

An IMF mission staff that visited Sri Lanka recently reported that it found economic developments better than projected.

The IMF mission staff held discussions with the Sri Lankan authorities as part of the first review of a $2.6 billion stand-by facility, or loan, that was granted to Sri Lanka in July.

During their visit, IMF representatives noted that economic growth is projected at three and a half percent in 2009, compared to the three percent predicted at the time of the standby agreement's approval. Inflation remains subdued and is expected to remain in the single digits in 2009, the IMF team reported. Exports have also showed signs of recovery.

The Government to Lease Northwest Islands for Hotels, Sri Lanka plans to lease islands off the northwest coast for tourist hotels as the travel industry recovers.

The Tourism Ministry will advertise the lease of five islands in the Kalpitiya lagoon region, which is being developed as a new up-scale resort complex. The Tourism Ministry and Investment Promotion Ministry are already in talks with international hotel investors on new projects. U.S. Government donates computers to start Jaffna training centre.