April 06, 2009 (LBO) – Sri Lanka should go slow on big projects because of funds shortages in order to be able to better cope with the economic slowdown this year, the central bank said. “Financial flows to the government and the private sectors are likely to decline in 2009 and recover gradually thereafter,” the bank said in its annual report for 2008.
The foreign financial flows to emerging and developing countries declined drastically in 2008 due to the ongoing financial crisis and resultant uncertainties in the global financial markets.
This trend is expected to continue in 2009 as well, the bank said.
It noted that though the government continues to get funds from development partners out of existing commitments, “it has become very challenging to raise loans from international markets at competitive rates of interest.”
As a result, implementation of some of the projects that require additional foreign financing and substantial domestic financing might have to be postponed or implemented at a slower pace, especially in 2009, the bank said.
“The government’s borrowings from the domestic banking system are likely to increase sharply in 2009 as well, since i