By Philip Fernando, former Deputy Editor Sunday Observer, Sri Lanka

ƒÆ’-¡ƒ”š‚ Latest stirring forecast of Sri Lanka’s economic upsurge signified an unprecedented decline in the country’s poverty levels. The economic growth rate predicted for 2011 and 2012 was 8 percent: the most positive prognosis of growth showing a drop in poverty from 15.7 percent in 2009 to 7.6 percent in 2010. Asian Development Bank (ADB) analysis that came out recently indicated that the trickled down benefits of economic expansion were fairly widespread. Development was reaching a wider spectrum and easily discernible. The same trend was observed by all major donor agencies, the World Bank and IMF.

ƒÆ’-¡ƒ”š‚ The economists were also quite pleased that the country had avoided the dilemma of exacerbating income disparities while pursuing faster growth rate – a common occurrence in most economic growth models elsewhere.

The economic assessment also jived with major predictions made by the Wall Street Journal, New York Times and Fox News that the path towards better economic times had arrived. The prospects of a booming economic trend seen in 2009 had exceeded all expectations. Post-conflict bounce is for real – there is no doubt about it.

Optimism well-founded

Their optimism seemed well-founded due to three primary reasons: sustainable macro-economic stability with remittances reaching safe levels, an environment for greater private sector participation and urgently enforced financial sector reforms making their impact felt.

ƒÆ’-¡ƒ”š‚ Investor sentiment was augmented by the approval of the tranches of the International Monetary Fund (IMF) standby arrangement. FDI strengthened sharply to an estimated $ 500 million. ADB added that at 1 percent of GDP, it needed to increase.

ƒÆ’-¡ƒ”š‚ The 2010 budget deficit decreased almost two percentage points from 9.9 percent in 2009 to 8 percent in 2010 supported by a lower expenditure ratio. The reason given were that revenue base had expanded with a simplified tax system, removal of import duty, revised import taxes on motor vehicles and cess rates. The budget deficit would come down further, most analysts believed.

ƒÆ’-¡ƒ”š‚ To cap it all Sri Lanka had achieved good progress in the equity market and the bond market should be looked into as a source of further growth according to most analysts.

Attacking poverty from all fronts

Poverty inclusive of the rural sector went down primarily due to multiple impacts of better resource allocation: the electrification of rural areas that increased from 75.5 percent in 2006 to 83.2 percent in 2009, the availability of safe drinking water that increased from 84 percent to 87 percent countrywide and the overall benefits of infrastructure development sparked job creation.

ƒÆ’-¡ƒ”š‚ The banking sector made a concerted effort to reach the widest area of operations. The unemployment rate had dropped from 7.2 percent in 2005 to 5.4 percent in 2009 while the school attendance among children was close to one hundred percent.

Wider development outreach

The simplest test of poverty reduction is how best citizens in remotest areas had access to better roads, schools, medical facilities and employment opportunities. It was amply demonstrated by the fluidity with which infrastructure growth reached the villages.

ƒÆ’-¡ƒ”š‚ Poverty reduction was nothing but the ability to bring development to the remotest parts of the country. That goal was being pursued with vigour most economists agreed. The Northern and Eastern areas received an impetus unprecedented in terms of the investment outlays. The electrification ratio, access to safe drinking water and overall improvement in roads, drainage and irrigation reached an all time high.

ƒÆ’-¡ƒ”š‚ Even basic social services and medical facilities denied by the LTTE leadership have been completely restored. The sustained recovery of the North and East would eventually be monumental.

ƒÆ’-¡ƒ”š‚ Sri Lanka needed to keep a tab on the inflationary pressures that usually accompany rapid growth. Overall inflation increased to 8.6 percent in March 2011, due to escalating food prices – food prices were 13.9 higher than a year earlier. The ADB expects inflation to average 8 percent in 2011.

ƒÆ’-¡ƒ”š‚ Some areas of vital importance also needed be watched especially in dealing with fuel and food prices arising from international factors currently being experienced. Overall the balance sheet spoke of an economy keeping to its goals.