Sri Lanka's economic nightmare
2004-02-15 18:13
Colombo - For foreign investors and international lenders, Sri Lanka appeared on the verge of economic lift-off, but the dream is turning into a nightmare after the dissolution of parliament.
The World Bank had forecast an 8% growth rate for Sri Lanka this year just before President Chandrika Kumaratunga sacked three ministers in the government of her rival premier Ranil Wickremesinghe in early November.
The political crisis worsened when the president dissolved the legislature controlled by her main political rival and called snap polls on April 2, nearly four years ahead of schedule.
The World Bank and the International Monetary Fund are holding back over US$250m in immediate assistance to the country until after a new government is in place.
The United States led international concern for the island's fragile peace process and warned that the political instability could cost the country dearly by jeopardising the Norwegian-backed peace process.
Diplomats are worried that a repetition of violence seen in the run-up to previous elections - at least 41 people were killed and over 700 during campaigning ahead of the December 2001 parliamentary polls - could deal a serious blow to the hotel industry, which is just coming into its own thanks to the 2002 truce between troops and Tamil Tiger rebels.
"What we need is stability and I hope the elections will not tarnish the peaceful image this country was quietly building," said Hiran Cooray, the MD of Jetwing Hotels.
The rebel Liberation Tigers of Tamil Eelam have warned that the snap elections were a "grave setback" to the peace initiative, but at the same time insisted that they will abide by the ceasefire monitored by Scandinavians.
However, the UN agencies and international donors are already raising alarm bells.
The UN agency for refugees on Friday warned that the snap elections could seriously slow down efforts to resettle hundreds of thousands of refugees in the island's embattled regions and erode international interest in Sri Lanka.
The country had won a $4.5bn aid package at a conference in June, but the release of that cash is linked to progress on the peace process.
But there has been no progress with the battle between the president and the prime minister, who are elected separately and are from rival parties, deepening by the day.
Tiger rebels had ended their boycott and were ready to return to the table when Kumaratunga sacked three ministers, prompting peace broker Norway to suspend its role here due to a lack of clarity about who was in charge.
The World Bank's director for Sri Lanka, Peter Harrold, said it had expected the two leaders to resolve their differences and pursue the peace process and was disappointed when they did not.
He said all indications by the third quarter of last year were that the economy was getting into the expansion stage after recovering from the unprecedented 1.5% negative growth of 2001.