May 28, 2010 (LBO) – Sri Lanka has to contain its fiscal deficit to sustain growth and maintain stability as the country emerges from a 30-year conflict and rebuilds war damaged infrastructure, Asian Development Bank President Haruhiko Kuroda said. In 2009, Sri Lanka’s deficit expanded to 9.8 percent of gross domestic product overshooting a 7.0 percent target set under an International Monetary Fund backed program after the island ran into a balance of payments crisis in late 2008.
“Macro-economic stability is crucial for sustained economic growth,” Kuroda said.
Sri Lanka may be able to increase growth in the short run by increasing spending and reducing taxes. But in the medium to long run if there is no prudent and sound fiscal policy, you cannot have sustained growth, Kuroda said.
“This has been shown many times all over the world, including the recent debt crisis in some European countries.” “With the end of the conflict and ensuing peace Sri Lanka can look forward to prosperous times ahead,” Kuroda told reporters in Colombo after visiting ADB funded projects in fomer war torn areas and meeting President Mahinda Rajapaksa.
“Sri Lanka is a country with immense potential to become a vibrant and prosperous country, and inclus