WALL STREET JOURNAL SAYS SINCE THE FALL OF TIGERS FOREIGN FUNDS HAVE FLOCKED SRI LANKA GOVERNMENT SECURITIES AND $100 MILION BONDS HAVE BEEN PURCHASED
Posted on June 25th, 2009

By Walter Jayawardhana

The Wall Street Journal newspaper said since the Sri Lankan Army killed the top leadership of the Tamil Tigers i the stock market has soared and foreign funds have flocked to government securities and about $100 million in Sri Lankan government bonds were purchased , quoting Sri Lanka’s Central Bank sources.

The report published in the world’s leading financial journal said the change happening “is clear from foreign-capital inflows in the wake of the Tamil Tigers defeat.”

The Journal said the end to a long war end to a long war has come just in time for Sri Lanka’s economy, according to the country’s central bank chief, who is now taking steps to lift low foreign-exchange reserves and spur growth.

Ajith Nivad Cabraal , the head of the Central Bank was quoted having told the newspaper ,”For 30 years, whenever investors spoke of Sri Lanka, the refrain was, ‘If only it wasn’t for the war,’ Today, it’s not the next word. A huge change has taken place.”

The change is clear from foreign-capital inflows in the wake of the Tamil Tigers defeat. Since the Sri Lankan army killed the top leadership of the Tamil Tigers early last week, the stock market has soared and foreign funds have flocked to government securities. About $100 million in Sri Lankan government bonds were purchased in the five-day period ended Wednesday, the central bank chief told the newspaper.

The result is that Sri Lanka is edging back from an economic crisis, brought on by the global turmoil and the strains of trying to squash the Tigers’ separatist insurgency, he further told the newspaper.

At the end of March, Sri Lanka’s foreign-exchange reserves had dwindled to about $1.3 billion. The paltry amount — covering a little more than a month of imports — forced the government to turn to the International Monetary Fund for assistance.

Some IMF members, including the U.S., have expressed reservations about extending another emergency loan, this time for $1.9 billion, to a country that has come under fire from aid agencies and human-rights groups, the Wall Street Journal further reported..

The government wants to begin rebuilding its war-torn north, including roads connecting it to the south and east. Next week, the government plans to roll out a special low-interest loan program to assist farmers, fishermen and small businessmen in the north. The region’s revival, though, may depend on how quickly the hundreds of thousands of predominantly ethnic Tamils are released from camps and able to rejoin the economic mainstream, the report further said. .

The Journal also said, “In a report Wednesday, Citigroup Global Markets recommended buying Sri Lankan treasury bonds on prospects that peace will improve political stability, reduce defense spending and spur foreign-capital inflows.

“The end of the domestic conflict between the military and the Tamil Tigers marks a milestone from a political and economic standpoint,” the bank said in its report.

The economy wasn’t expected to grow more than 3% this year, after averaging 6% growth over the past four years, according to the central bank chief. But now that the global economy is showing signs of coming out of its slump, he said, the government may raise that forecast a couple of percentage points.

“The war’s ending and the global economy is recovering,” Mr. Cabraal said. “That’s a powerful combination.”

In a related development Anura Priyadarshana Yapa , who is engaged in an investment promotional tour in Singapore and Thailand said more than 50 investors were interested in Sri Lanka in Singapore , encouraged by there is no war in the country. He said in Thailand he received a similar reaction.

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