Sri Lanka think tank warns against reliance on foreign loans

Kris Canekeratne at LBR LBO Tech Conference

Nov 01, 2010 (LBO) – Depending too much on foreign borrowings to fuel growth in post-war Sri Lanka can be risky, the Institute of Policy Studies (IPS), a think tank, has warned in a new report. Its annual ‘Sri Lanka: State of the Economy’ report for 2010 is devoted to an assessment of the economic challenges of post-conflict growth and stability in the island, whose 30-year ethnic war ended in May 2009.

Early, robust economic growth that has an immediate widespread impact will go some way towards meeting the aspirations of a population weary after decades of war, it said.

First-half economic growth in excess of 7.5 percent has already signalled that a strong post-conflict economic recovery is underway.

“However, beyond the immediate recovery efforts must lie clear medium term policy goals that anticipate the transition to long term post-conflict economic development,” the IPS said..

“A growth boom fuelled by an infrastructure-led investment drive that relies heavily on foreign borrowing can run up against problems,” the institute warned.

High economic growth can in turn fuel rapid growth in import expenditure and raise issues of external debt sustainability in the me