Govt., needs to take up long term reforms to sustain growth after tsunami rebuilding

Tsunami rebuilding is expected to spur growth in the short term but economists say the government needs to phase out aid flows and cap spiralling inflation for later growth. Tsunami rebuilding is expected to spur growth in the short term but economists say the government needs to phase out aid flows and cap spiralling inflation for later growth. Institute of Policy Studies (IPS) Economist Dr. Dushni Weerakoon says reconstruction and rehabilitation of tsunami damaged help economic growth but warned that the government needs to phase out aid flows and cut back on its borrowing programme to cap spiralling inflation.

Giving an overview of the UN ESCAP’s economic and social survey of Asia and the Pacific launched this week Dr. Weerakoon said Sri Lanka’s annual average inflation rate was bordering 11 percent in early 2005, very close to topping a state revised forecast of 12 percent for the whole year.

The UN report identified the government’s widening domestic debt – money borrowed to finance social spending and subsidies, as a key factor contributing to inflationary pressure in the economy.

The report said that inflation in Sri Lanka accelerated during the second