Tuesday, January 22, 2002
Sri Lanka PM says economy near bankruptcy
REUTERS TUESDAY, JANUARY 22, 2002
COLOMBO: Sri Lanka's small economy is near bankruptcy and quick policy action is needed, Prime Minister Ranil Wickremesinghe told Parliament on Tuesday.
"The country is near bankruptcy. There has been no significant foreign direct investment and production is in a parlous state," he said in policy speech from the new government.
Wickremesinghe said his government would outline its course of action to resuscitate the economy, estimated to have shrunk by 0.5 per cent last year, in a delayed budget in March.
The new Administration was ready to take steps towards "the regeneration of the economy within this year itself", he said.
Analysts said Wickremesinghe's government, which came into power in a snap general election in December, has shown signs of wanting to implement some tough economic reforms to revive the economy.
Despite facing a mounting budget deficit forecast at between 12 and 14 per cent this year due to a shortfall of state revenues, Wickremesinghe said he hoped to provide incentives to the private sector to increase investment.
"We need to immediately launch a programme to provide incentives for the creation of small-scale and big-scale ventures," he said.
The country would be divided into five economic zones to woo local and foreign investment for industries, tourism, trade, fisheries and agriculture, and necessary legislation to promote investment would be brought to Parliament soon, he said.
The country's main export item, garments, saw a sharp drop in international demand last year and Wickremesinghe said the end of a system of quotas for garments under the Multi Fibre Agreement in 2004 could lead to a 50 per cent contraction in the industry.
"We intend to negotiate with the American government and the European Union with the intention of removing tariffs on manufactured garments from Sri Lanka," he said.
Sri Lanka's economy has been weighed down by a nearly two-decade-long war against Tamil Tiger rebels fighting for a separate state in the north and east of the country.
Hopes of peace talks between the government and the rebels have grown after the new government came into power, with both declaring ceasefires, the first time in seven years the two sides have observed truces at the same time.
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