• May Day distress signal from CB
• Big battle to stop LTTE cargo
• UNP to decide on crisis over Mendis tomorrow
• CBK responds positively to Mahinda
• Deflated show on workers' day
• Lankan judge for Rwanda war crimes probe

May Day distress signal from CB

Economic crisis looming: budget deficit up, growth rate down

Sri Lanka has suffered an economic setback with the overall budget deficit increasing from 1997 to 1998 and forecasts for economic expansion becoming gloomy, the Central Bank has warned.

The budget deficit has increased to 9.2 per cent of the Gross Domestic Product in 1998 from 7.9 per cent in 1997, according to a summary of the latest Central Bank report on the economy.

The increase according to the report is mainly due to higher security related expenditure. Total security expenditure increased from Rs. 47,728 million (5.4% of GDP) to a record Rs. 56,390 million (5.6% of GDP) in 1998.

Other reasons are increased wage bills due to increased employment, transfers to loss making public sector institutions, and a significant reduction in tax revenue due to 'extensive tax concessions granted in the 1997 budget', the report said.

"Sri Lanka is already a high inflation country. A high budget deficit, high inflation and high interest rates discourage private investment and slow down economic expansion. There is an urgent need to bring the fiscal deficit reduction programme back on track to protect balance of payments viability, avoid a rekindling of inflation, reduce pressure on the exchange rate and avoid an erosion of private sector confidence in the government's economic policies," the Central Bank said.

In addition, the conflict in the North and East has resulted in the development of key sectors being curtailed and public sector investment falling by 8% during the past 13 years, due to resource constraints.

The country's economic growth rate also hit its lowest in five years, with growth falling to 4.7% in 1998 compared with an average growth rate of 5.6% during the past five years.

The report has pointed out that there is 'the need to strengthen structural reforms in the coming years because of uncertainties relating to security related expenditure'.

While the annual rupee depreciation rising from 5-6% during the past few years to 9.6% last year helped the industrial sector somewhat, it resulted in an increased foreign debt.

With foreign aid to developing countries declining, adequate foreign resources for development projects necessary to increase economic growth also do not seem forthcoming.

The Central Bank has also expressed concern that while private sector investment levels have been maintained, growth of investment has been slow compared to savings, again forecasting weak prospects for faster economic expansion. "A continuation of depressed world market conditions is likely to slow down economic growth and employment generation in 1999," the report said.

Another one of the country's requirements is 'a carefully designed social system'. The aging population and rising old age dependency call for a social security system which will minimise burdens on the working population and prevent a fall in living standards during old age.

Sri Lanka's main foreign exchange earning sectors such as rubber, coconut, gem and jewellery were also hit hard due to the recession last year and experienced a slow growth.

Big battle to stop LTTE cargo

Navy fast attack craft were fighting a bitter sea battle off the Mullaitivu coast last night with a flotilla of Sea Tiger boats deployed to smuggle in military supplies from a ship in international waters.

Navy officials said last night that one heavily laden LTTE boat from a logistic convoy of five boats was destroyed. The others were being engaged but no immediate reports were available, they said.

Naval craft moved into the area after they received reports that a ship was due to unload military cargo in the deep seas off Mullaitivu.

Early yesterday, a Sri Lankan Air Force reconnaissance flight confirmed the presence of an unidentified ship, some 80 to 90 miles north east of Mullaitivu.

It was later confirmed to be a ship from which the cargo had been unloaded to the logistics boats.

Also see Situation Report

UNP to decide on crisis over Mendis tomorrow

The working committee of the UNP is meeting tomorrow to take a decision on the Wijeyapala Mendis controversy which has thrown the main opposition party into a political and legal muddle.

A top UNP source told 'The Sunday Times' party Leader Ranil Wickremesinghe was in consultation with other members on how to handle the situation after the Supreme Court last Tuesday quashed the findings of the Special Presidential Commission against Mr. Mendis.

On the basis of the SPC findings, Mr. Mendis was suspended from the UNP while a motion was introduced in parliament by the government to expel him and strip him of his civic rights.

Mr. Mendis told The Sunday Times in an interview that he believed that with the Supreme Court judgement his membership of the UNP and other posts he held would be automatically restored. But the party leader and some others in the hierarchy are known to hold a different view with Mr. Wickremesinghe saying Mr. Mendis must reapply for membership.

A group in the UNP, including A. C. S. Hameed, M. H. Mohamed, Susil Moones-inghe, Stanley Kalpage and Tilak Marapana opposed his suspension. Dr. Kalpage has gone to the extent of calling on the UNP to apologise to Mr. Mendis. Mr. Mendis is expected to be present in parliament when it meets on Tuesday.

See interview

CBK responds positively to Mahinda

Minister Mahinda Rajapakse's widely-publicised letter to President Kumaratunga, proposing major changes in the PA is to be taken up for discussion at the highest level, political sources said yesterday.

They said President Kumaratunga had responded positively though the letter was highly critical of the PA's performance at recent elections and loss of the social forces that helped bring it to office in 1994.

They said some ministers in the inner cabinet had questioned the validity of the letter but the President felt it should be discussed and some of the proposals implemented to streamline the party before upcoming elections.

Minister Rajapakse told The Sunday Times he believed a new course of positive action was required to regain the PA's support base, if public trust is to be retained and future elections were to be won.

"It was written with the intention of building the PA, and I believe it has been accepted in that spirit," he said.

SLFP sources have indicated major reforms and changes might come soon, including a change at the top with Ms. Kumaratunga taking over as president of the party and Mangala Samaraweera as general secretary.

Deflated show on workers' day

May Day in Colombo city was relatively low key if not dull with the turnout being much less than in previous years, while banners and decorations were also few.

Among the reasons cited for the lack of crowds and enthusiasm was the long weekend and the security situation with a memories of what happened on May day 1993 when the then President R. Premadasa was slain in a suicide bomb attack.

Yesterday morning, most streets of Colombo were deserted with shops shut and little traffic, the most notable presence being 3,000 security personnel on duty. The lack of enthusiasm was evident even among party workers.

Friday was a poya holiday and Thursday also was a half holiday for many. Thus most city workers or residents had either gone to their villages or for a holiday.

Minister Alavi Moulana, the PA's main May Day Organiser, said the party did not expect a large crowd as in previous years mainly due to the long weekend.

Though the crowd was lesser than in other years, most of the ministers and MPs were present at the PA rally at the Town Hall. Apparently for security reasons, the arrival time of President Kumaratunga was not announced. She turned up around 5.35 p.m. and got a rousing ovation from the crowd.

With the UNP going to Galle for an election-oriented May Day rally and the MEP preferring Gampaha, the main attraction in the city was the traditionally colourful and powerful JVP procession.

The UNP turned its May day rally more into an election propaganda meeting giving more prominence to its candidates than to the party leadership.

Except for a few bus-loads from Colombo, the crowd was mainly from Galle and other southern areas.

The UNP procession was led by General Secretary Gamini Atukorale while party leader Ranil Wickremesinghe and Chairman Karu Jayasuriya came directly for the rally at the esplanade.

From morning buses were seen entering the city, though not fully packed, with red-clad JVP supporters, including children. The party procession from Cooray Park in Wellawatte was led by a motorcycle parade.

Trade unions and other worker movements held meetings in the morning but there too the turnout was much less than expected.

One union in Kandy had to cancel its proposed procession because only 12 members turned up.

Lankan judge for Rwanda war crimes probe

By Our Legal Editor

Supreme Court Justice Dr. Asoka de Z Gunawardena has been offered an appointment in the UN's International Criminal Tribunal for Rwanda, The Sunday Times learns.

The prestigious post is on par, prestige and salary wise with that of a judge of the international Court of Justice and is a four year term on a full time basis.

UN Secretary General Kofi Annan has informed the Sri Lanka Government of the offer this week.

The offer comes in the wake of an elected judge of the International Criminal Tribunal for Rwanda resigning and thereby creating a vacancy.

The Government actively canvassed Justice Gunawardena's candidature for the post. Despite polling well in the early rounds of voting Justice Gunawardena failed to be elected to the tribunal.

Justice Gunawardena, 56 is expected to take up his new job as early as May 31 this year. His term of office at the UN will run till 2003.

The Sri Lanka Government also canvassed the unsuccessful candidature of Justice S.N.B. Wadugodapitiya for a similar tribunal on Bosnia.