In less than two years the crushing civil war ended, there’s been a sharp reduction in rural poverty in Sri Lanka, the Asian Development Bank (ADB) said on Wednesday. In 2009, the year the war ended, rural poverty stood at 15.7 %. Within a year, in 2010, it had come down to 7.6 %, ADB economist Narhari Rao said on Wednesday. In terms of rural electrification, the country had progressed rapidly as well. In 2006, the coverage was 78.5 % and in 2009, it rose to 83.2 %. Rao forecast that Sri Lanka will experience around 8 % growth rate in both 2011 and 2012. In 2010 too, the ADB estimates that the economy grew by 8 %. This was possible because the recovery was spread out across all sectors – agriculture, manufacturing and services. “Over all there was a lot of confidence in the Sri Lankan economy,” he said. Rao was addressing the media ahead of the release of ADB’s flagship annual economic publication, Asian Development Outlook 2011.
The ADB’s words of encouragement about the Lankan economy came within days of the International Monetary Fund (IMF) saying the country’s economic growth was strong. The IMF statement came after the organisation approved disbursement of the seventh tranche of a $2.6 billion loan to Sri Lanka. The sixth tranche of the loan is worth $218.3 million, part of a loan programme approved in July 2009 after Sri Lanka’s government emerged victorious in a quarter-century separatist war. The impact of crop damage caused by flooding in January and February will be limited owing to the size and strength of the economy, the IMF’s executive board said in a statement. On its part, the ADB expects inflation to average 8 % in 2011. Supply side factors will help restrain price rise in 2012, including growth in local food production and improvements to infrastructure. The Central Bank of Sri Lanka will be forced to intervene because of the inflation. “We think Central Bank will tighten monetary policy later this year. So interest rates will go up. To the extent possible, the government should try and allow price flexibility and exchange rate flexibility,” Rao said.