Financial Times

Government gets economy going
Prepares plan to cushion poor, industry from record oil prices.
By Feizal Samath
The UPFA government, strongly rejecting claims that there is no development while its economic policy is uncertain, said last week that three major projects - two funded by the World Bank - would be kicked off soon.

In addition to this, Finance Minister Dr Sarath Amunugama said he was planning a major economic policy statement in Parliament this month. "Under the Fiscal Management Responsibility Act, the Minister of Finance has to make a statement to parliament regarding the management of the economy.

“This I intend doing during the course of this month. This was explained in detail to a visiting IMF team," he told The Sunday Times FT. In a wide-ranging interview, the Finance Minister - less than two months in the job - spoke at length on forthcoming developments projects, discussions with multilateral agencies, ways of improving tax collections and plans to cushion the public and private sector industry against rising oil prices. (See the main section of the newspaper on the plan to tackle oil prices.)

Dr Amunugama said the World Bank has approved a new $90 million facility called "Gami Diriya (Village Upliftment)" aimed at developing six districts - Badulla, Moneragala, Galle, Matara, Hambantota and Ratnapura. "This development is a blow to those particularly in the media who were saying that the World Bank is going to curtail assistance," he retorted, adding that this is likely to be one of the flagship projects of the UPFA government and will be managed by the Samurdhi Ministry.

A five billion-rupee water project in Kandy funded by JBIC (Japan Bank for International Cooperation) will be inaugurated by President Chandrika Kumaratunga in the next three weeks. This is the project proposed by the President during the earlier PA government period.

He said another important decision is a $30 million World Bank project for the development of the northeast. Peter Harrold, the World Bank's Country Director was in Killinochchi last week to discuss (with the LTTE) the modalities of launching this project.

Lashing out at the media, the Finance Minister said media reports that money pledged at the Tokyo donor conference was not being used is completely false. "In spite of all the hoopla, the Tokyo donor allocations included all the existing pledges by the major donors and multilateral organisations.

“Part of this allocation is being used under the regular bilateral and multilateral programmes," he added. He said there were long discussions with an IMF team that visited Sri Lanka recently while discussions have also been held with the ADB and the World Bank. "We have had a very cordial and detailed discussion with the IMF mission where we have explained our stance on the economy.

There doesn't seem to be any major problems (in dealings with the IMF)." Dr Amunugama said the IMF suspended the second tranche of the Poverty Reduction & Growth Facility sometime in November last year when Mr K.N. Choksy was Finance Minister.

The UNP government, he said, was faulted for delaying the Revenue Authority Bill. "I explained in detail (to the IMF) our approach to these matters and I must say the IMF team seemed quite receptive."

He said the Indian elections also showed some of the results of IMF policy thinking. "I think they (IMF) too were very receptive to a new point of view which differed from the orthodox IMF economic medicine." Dr Amunugama said he was planning measures to raise tax collections and also plug loopholes in Tax Amnesty laws in which several wealthy corporates escaped the tax net.

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