Sri Lanka announced Tuesday it would seek international loans as the government admitted a sharp economic slowdown following the Tamil rebel attack against the country's only international airport.
Treasury Secretary P.B. Jayasundera said the country's economic growth rate this year was expected to come down to about 3.0 percent from the originally projected 4.5 percent.
The effects of global recession, last year's high oil prices and last month's rebel attack at the airport were adding to the problems faced by the economy, the secretary said.
"Despite the setbacks, we are managing the economy on reasonably strong grounds," Jayasundera claimed.
He said the government was hoping to get a 200 million-dollar loan syndicated through the Deutsche Bank, but insisted that the government will not pay more than 7.0 percent interest to secure the financial package.
He was also optimistic on obtaining a second tranche of a rescue package the International Monetary Fund (IMF) granted in April in a bid to shore up Sri Lanka's dwindling foreign reserves.
However, official sources said the government would have to enter into a fresh agreement with the IMF to secure the 30 million-dollar tranche from a 253 million dollar stand-by credit facility.
Jayasundera said the government was also expecting a 500 million-dollar package through the IMF's Poverty Reduction and Growth Facility (PRGF).
The IMF said last week that Sri Lanka's economy grew an estimated 1.0 percent in the first six months of the year, down from the original forecast of 3.0 to 4.0 percent.
Nearly four weeks after the attack on the Bandaranaike International airport when four civilian passenger jets were completely destroyed and two more damaged, thousands of jobs are being cut.
Sri Lanka's tourism industry, which celebrated a record number of foreign holiday makers in June, is now seeking handouts from the government, officials said.
The July 24 rebel attack on the airport saw an immediate increase in insurance premiums on aircraft entering Sri Lanka. Hong Kong's Cathay Pacific airlines pulled out while others curtailed flights to Colombo.
The war-risk insurance slapped on aircraft was extended to ships calling at Colombo's only seaport last week. At least 10 international shipping lines either cut down calls to Sri Lanka or completely pulled out.
Exports had dropped by 1.5 percent in the first half of the year to 2.43 billion dollars, according to the Central Bank's latest figures.
The effects of rebel attack on tourism and trade, which accounts for more than a third of the country's gross domestic product, will have a negative impact on the economy in the months ahead, the IMF warned last week.
"Notwithstanding a satisfactory performance through June, indications are that the budget is likely to come under increasing pressure in the second half of 2001," the IMF said.
"The recent airport attack has also negatively impacted on the budget and revenues from tourism and exports, as well as the general business confidence." |
