Apr 08, 2014 (LBO) – Sri Lanka is expecting 7.8 percent growth in 2014, officials said despite a drought that is hurting agriculture and requiring more credit for power subsidies, which has de-stablised the economy in the past. “The drought is worrying us to some extent,” Central Bank Governor Nivard Cabraal said.
“In the agricultural side we have to make sure that there is no unnecessary spike in prices.”
“At the same time we can have an impact where generation of electricity generation is concerned.”
Sri Lanka’s rice production is expected to be hit by the ongoing drought with farmers asked to refrain from growing the water intensive crop.
While a price rise in food in non trade items such as fresh vegetables, due to drought will be a temporary phenomenon, which will be cleared when the agriculture recovers.
But as long free trade is allowed, the prices of tradable goods such as cereals should not go up, analysts say.
In Sri Lanka however rice is given import protection to fatten farming lobby profits and prices which are anyway higher than world can go up even higher due to a drought.
Tea output has also started to fall, though prices are still strong, in sharp contrast to many other c