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Sri Lanka’s economy should grow by 7 percent this year, up from 4.5 percent last year, while inflation will end the year far below market expectations, Finance Minister Ravi Karunanayake said yesterday. 

Speaking exclusively on a Reuters Global Markets Forum, Karunanayake said Sri Lanka would be able quickly to refinance much of its foreign borrowing at lower cost after next week’s general election.

Predicting a “stupendous victory” for Prime Minister Ranil Wickremesinghe’s reformist government at the August 17 poll, Karunanayake said he hoped to formalise an investor-friendly set of policies after the election.

Commenting on the growth outlook, he said: “I am a born optimist and I am of the opinion we would be able to maintain a rate of around 7 percent.” His comments referred to gross domestic product figures that have been rebased to 2010.

Inflation would be “far lower” than consensus expectations among analysts of 2.7-3.2 percent at the end of the year, he added.

Wickremesinghe’s government has sought to refinance loans taken out under former President Mahinda Rajapaksa to back major investment projects, many of them Chinese led.

Rajapaksa, ousted in a presidential election in January, is campaigning to return as prime minister in an electoral contest that pits his pro-China stance and against the non-aligned position taken by the current government.

“High debt is certainly a major concern but this is a necessary evil we had to inherit,” said Karunanayake, a senior figure in the minority government led by the United National Party that is targeting a parliamentary majority.

Despite opposing the expensive borrowing taken out under Rajapaksa, the government is determined that Sri Lanka is seen as a “financially disciplined nation”. Friendly states have come forward to help Sri Lanka refinance its debts, he said.

“Friendly world nations have accepted us with open arms and on many instances are willing to lend at 0.05 percent 1 percent, as opposed to the previous commercial borrowing which was averaging 2-9 percent,” the minister told the online event.


(REUTERS)

 

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Sri Lanka seeks compromise on China-backed port city

REUTERS: Sri Lanka wants to negotiate a “win-win” compromise that would allow a major Chinese-backed real estate project to resume after months of delays, Finance Minister Ravi Karunanayake told Reuters yesterday.

Karunanayake said talks on the US $ 1.4 billion ‘port city’ project on the Colombo waterfront - part of China’s strategy to develop a maritime Silk Road from Asia to Europe - could help bring a final understanding but ruled out the possibility that China would end up owning land directly.

“Freehold will certainly be changed into a mutually holding type of a situation, so that there is no person that will control land in another country,” he said in an interview, a week before Sri Lanka holds a general election.