Sri Lankan government is preparing plans to attract more foreign investment to the country. Its economic growth is set to outstrip India’s for the first time since 2000 as record foreign investment and government spending fuel a resurgence after almost three decades of civil war.The island nation’s $50 billion gross domestic product will increase 8.5 per cent this year, up from 8 per cent in 2010 and bucking a global slowdown, Central Bank of Sri Lanka Deputy Governor Dharma Dheerasinghe said.
India’s $1.7 trillion economy, Asia’s third-biggest, is likely to grow 8.2 per cent in 2011 according to estimates by the International Monetary Fund, the slowest pace since 2009.
“We had problems during the last global recession, but it was in the background of a war situation,” Dheerasinghe said in a phone interview on Aug.17 from the capital Colombo. “History won’t repeat for Sri Lanka. In the medium term, growth can even be 9 per cent.”
The return to peace in Sri Lanka is luring overseas money and tourists back to the tear-drop shaped Indian Ocean island. A $1 billion sale of sovereign dollar bonds last month was more than seven times oversubscribed. President Mahinda Rajapaksa’s government has pledged to spend $1 billion annually for at least three years from 2010 on projects such as a coal-fired power plant, a four-lane expressway and a container shipping hub.
The global stock slide that wiped off $6 trillion in market value since July 24, triggered by the US credit downgrade and a deepening European debt crisis, hasn’t deterred investors in the island. The Colombo All-Share Index surged almost 10 per cent in the period, compared with a 12 per cent slump in India’s benchmark Sensitive Index.
The Sri Lanka gauge plunged 41 per cent in 2008, the worst on record, a year before government troops defeated the separatist Liberation Tigers of Tamil Eelam, ending the rebels’ quest for an independent state in the north and east. Post-war growth helped make the index the world’s second-best performer in 2010.
“The end of the 26-year conflict has brought a new-found optimism that is boosting consumer and business confidence,” said Samantha Amerasinghe, a Colombo-based economist at Standard Chartered Plc. “Prospects look much brighter today and Sri Lanka’s economic rebound remains intact despite the current uncertain and challenging global environment.”
Dollar-denominated bond sales by Sri Lanka are attracting more investors as credit-rating companies raise their outlooks. Last month, Fitch Ratings upgraded Sri Lanka’s ranking by a notch to BB-, three levels below investment grade.
From / Gulf Today