Economy grew at 7.2% in Sri Lanka
Posted on April 9th, 2014


No extraneous factors deterred investors

Sri Lanka’s economy grew at a rate of 7.2 per cent over the past financial year, making the island one of Asia’s fastest-growing markets after China, states the Financial Times of London in an article.

The successful issuance of a sovereign bond suggests that no extraneous factors deterred investors against a backdrop of heightened appetite for the emerging market and frontier debt, according to Murtaza Jafferjee, the head of brokerage JB Securities in Colombo.

The South Asian country sold $500m of five-year debt on Tuesday with a coupon of 5.125 per cent – its lowest to date – and attracted more than $4bn in orders. Interest was particularly strong from US investors, who took up almost half the deal the Financial Times states.

In January, Sri Lanka raised $1bn in a separate sovereign issue, offering a five-year bond with a 6 per cent yield at a time of growing worries over emerging and frontier markets as the US Federal Reserve rolls back its ultra-easy monetary stance.

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8 Responses to “Economy grew at 7.2% in Sri Lanka”

  1. Mr. Bernard Wijeyasingha Says:

    Though this is commendable news there is a larger picture which Sri Lanka could be adversely effected. The US economy is about to collapse. I submit that it may not happen this year but it will happen. Google “US national debt clock real time” and see the chart. At the top left corner is our running debt of 17 trillion dollars. Our total debt including unfunded liabilities total 125 Trillion dollars. Our share of the global debt is the largest for any nation.

    Our economy is shrinking, taxes are rising. We no longer have a viable manufacturing or industrial sector. Detroit once the car capital of the world is now bankrupt and vast areas of that city are empty. Detroit is but one of a series of American cities that have filed for bankruptcy. The Obama governments “Amnesty program”will give citizenship to an estimated 30 million illegal uneducated people (gov states 11 million) who do not have any skills worthy of a job. they will join the growing number of people in the Welfare system which falls in the ‘unfunded liabilities”. Add to that number their family members who will follow. The tax base is shrinking, the middle class of America once touted as the quintessential representation of the US is practically gone. the population now falls into the lower middle class to the poor and the elite super rich. Even if the elite super rich are taxed 100% they cannot pay the interest on our debt.

    The US borrows 40 Billion per month from China. do not believe me then Google it. The situation in the EU the next largest market is also collapsing. Many EU nations have had a socialist government system where Unions ran the nation and people were cared for by the government from cradle to grave. Now those systems are failing Greece is a classical example of it. But one can look at Portugal, France, to Great Britain and their unemployment figures are in the double digits.

    The reason I point this out is that when the collapse happens it will drag the entire world with it. Only a few autocratic nations may survive and those not yet developed as in Africa or South America may survive simply because they are underdeveloped to be effected.

    Right now due to the devaluation of the dollar which is the international currency of exchange, wholesale buyers in other parts of the world are paying for our debt. Since the dollar is the int’l currency of exchange when it inflates it also causes the inflation of every exchange made using the dollar. So nations dependent on energy imports are most vulnerable for they will pay more for a unit of energy each time the dollar inflates. That means most of the wold is already paying for the decisions made in Washington D.C.

    There was a similar economic catastrophe in the past. It occurred in Germany after world war 1 when the victorious European nations demanded reparations from Germany in Gold. When Germany failed to pay that once France took over the Ruhr Valley. The Ruhr Valley held Germany’s industrial center and where Germany got her coal. this plummeted the German Mark. once a few German Marks could buy a loaf of bread but eventually it took cart loads of Marks to buy that same loaf of bread. It was under the Wiemar Republic and Germany collapsed. The difference between this German model and the US is that the German Mark was NOT the International currency of Exchange. The British Pound was. Now the US is going down the same path as Germany under the Wiemar Republic and that is why I state emphatically this time when the US (and the EU) collapse economically it will be a global catastrophe.

    For Sri Lanka to survive this she needs to be a member of the SCO and CSTO. Even though Russia and China will be badly hit an alliance of the kind I am suggesting will save Sri Lanka from an economic catastrophe. Russia is the world’s largest energy producer and exporter, China is the world’s largest manufacturer and the world’s largest electrified nation. China has replaced the US on several indexes. There is a good chance that China (along with Japan and Russia) will sell off the US bonds on the open market before the US collapses. It will shield China if the Yuan replaces the dollar as the international currency of exchange…as China wants this to happen. India will face an economic disaster of such magnitude that it would be best that Sri Lanka is more engaged with China starting as soon as possible.

    On a purely economic issue Sri Lanka needs to take the initiative to shift her geopolitical role in the region to become a member state of the SCO and the CSTO even if that means offering both China and Russia a military or naval base in Sri Lanka. The economic issue will happen. There is no way the US nor the EU can reverse the economic calamity heading towards them. On the strategic issue again Sri Lanka needs to quickly pivot towards becoming a member state of China and Russia now before the economic and the geopolitical issues converge in that region.

  2. Ananda-USA Says:


    Some of what you say are true: The US is piling on debt faster than tax receipts increase, and the growth in the economy is still anemic. Most of that debt is held by China. Also, although the US has been anticipating a peace dividend from withdrawal from Iraq and Afghanistan, and reduction in strategic nuclear weapons to meet START 3 goals, military expenditures will soon BALLOON by TRILLIONS OF DOLLARS to meet projected new THREATS from a resurgent Russia acting aggressively to defend her essential interests in her own backyard.

    However, there are some POSITIVE developments on the horizon that portend accelerated economic growth: Automotive industry has turned the corner to profitability, and are now building cars that compete effectively with imports. Soon Tesla will be the largest car manufacturer in the United States. The green energy revolution and advanced technologies (genetics based biotechnology, other medical technologies, nanotechnology, 3D printing and robotics, energy storage, smart energy grid, Internet of devices, etc) are a few promising areas.

    Yes, Social Programs such as healthcare, retirement income, and increased minimum wage will cost money, but the failure to effectively address these critical runaway issues now would cost even more. Even with the failure of the United States to arrest unrestricted illegal immigration that is wrecking local government budgets, my bet is that the GROWTH in the economic pie due to technology advances and success in addressing runaway costs of social programs will more than offset the negative factors you identified. The ELEPHANT in the ROOM will be the INCREASES in Military Expenditures by the US Govt as it moves to counter real and imagined international threats.

  3. Dilrook Says:

    Factual but not complete.

    7.2% is in rupee terms. When adjusted for depreciation it is close to a dismal 1%. Alternatively the rupee depreciated about 3.9% against the USD, and the real GDP growth rate is 3.1% – a very low real growth rate (without adjusting for USD inflation). Emerging from war, Sri Lanka had the potential to do many time more.

    Coupon of 5.125% is very high compared to the current time. On the same day Mauritius (a much smaller economy) raised bonds at only 4.7%. We are paying far too much out of desperation.

    This year $1.4 billion is due in interest on loans and a further $3.4 billion in capital repayment. I doubt the government has the money to pay these. That is why they are borrowing large chunks of money from the bond market (which is more expensive than IMF). China refuses to give loans for consumption.

    Wasting borrowed funds on northern development was one crucial mistake the government did. It didn’t increase tax revenue (as northern population are notorious tax evaders). It only benefitted less than 5% of the population as Muslims and Sinhalese are not allowed to share in the economic prosperity of the north due to outdated laws and no resettlement.

    At least now the government must stop investing anything in the north and concentrate on elsewhere particularly in politically influential areas.

  4. Ananda-USA Says:


    I hope China will continue refusing to give loans to Sri Lanka for consumption.

    Borrowing for current consumption is a direct path to bankruptcy, whereas borrowing for well thought out long-term infrastructure development is OK provided it does not exceed the ability of the country to service those loans out of current income and the income from those capital investments.

  5. Dilrook Says:


    I too hope so.

    Current borrowing is not easily serviceable at 5.12% in dollar terms (about 10% in rupee terms) with the scant return in infrastructure investments. That is higher than GDP growth rate. External borrowings were $13 billion by 2009 which is acceptable. But since then it doubled to $26 billion by 2013. Further borrowing in 2014 puts the country in serious crisis. These are not invested in projects that give a sizable return for the government which has to repay the loans and interest. Too much has been wasted in the north with no benefit for the government or 95% of the people.

    Large scale borrowing also lead to high imports (as there is dollars for imports). This destroys local industries further.

    Foreign investments are good provided they generate very large scale employment and introduce new technology. All foreign investors take out more money than they put in (otherwise they would not invest). In the long run foreign investments are a net drain on Sri Lanka’s trade deficit. Government should instead encourage local investors.

    These are simple economic truths disregarded by the national leadership. Borrowing over the serviceable limit is a vicious cycle.

  6. Mr. Bernard Wijeyasingha Says:

    Ananda: The green revolution in America is not as successful as in China where the non renewable energy output by China equals the combined energy output of Germany and France (article in Asia Times). Remember Solyndra? that was but one green company that went belly up.
    You did not mention it but electric car production is a sham since to charge an electric car when the US energy is basically a coal run energy sector means more coal is being burned with the increase of electric cars thereby defeating the purpose of an environmentally friendly car.
    I copy and paste: “Automotive industry has turned the corner to profitability, and are now building cars that compete effectively with imports. Soon Tesla will be the largest car manufacturer in the United States. The green energy revolution and advanced technologies (genetics based biotechnology, other medical technologies, nanotechnology, 3D printing and robotics, energy storage, smart energy grid, Internet of devices, etc) are a few promising areas.”.

    The automotive industry may have turned the corner but Detroit once the capital of the automotive industry is dying. All the new areas of growth you have stated has not made a dent in the very high unemployment figures. During the Great depression lines of people standing at soup kitchens highlighted the plight of that era in the US. The only reason we do not see such a picture today is due to food stamps. A record number of Americans are now on food stamps and the sum total of them surpass the number of the Great Depression.

    When you take the overall picture of the US economy including the possibility that a Democrat will win the Presidency (most electoral votes come from Democratic states, Hillary Clinton is running on the issue of the woman’s vote) who will perpetuate the Obama legacy the US will collapse and so will the US dollar. Did you Google “US national debt Clock real Time”. We as a nation cannot sustain that level of debt and the Obama government continues to raise the debt ceiling.

  7. Mr. Bernard Wijeyasingha Says:

    Here is an article from the Asia Times which addresses both the foreign and domestic situation of the US:

    New US reality: An empire beyond salvation
    By Ramzy Baroud

    US Secretary of State John Kerry couldn’t hide his frustration anymore as the US-sponsored Palestinian peace process continued to falter. After eight months of wrangling to push talks between Israel and the Palestinian Authority forward, he admitted while on a visit to Morocco on April 4 that the latest setback had served as a “reality check” for the peace process. But confining that reality check to the peace process is hardly representative of the painful reality through which the United States has been forced to subsist in during the last few years.

    The state of US foreign policy in the Middle East, but also around the world, cannot be described with any buoyant language. In some instances, as in Syria, Libya, Egypt, Ukraine, and most

    recently in Palestine and Israel, too many calamitous scenarios have exposed the fault lines of US foreign policy. The succession of crises is not allowing the US to cut its losses in the Middle East and stage a calculated “pivot” to Asia following its disastrous Iraq war.

    US foreign policy is almost entirely crippled. For the Obama administration, it has been a continuous firefighting mission since George W Bush left office. In fact, there have been too many “reality checks” to count.

    According to the logic of the once powerful pro-Israel Washington-based neoconservatives, the invasion of Iraq was a belated attempt at regaining the initiative in the Middle East and controlling a greater share of the energy supplies worldwide.

    Sure, the US media made much noise about fighting terror, restoring democracies and heralding freedoms, but the neo-cons were hardly secretive about the real objectives. They tirelessly warned about the decline of their country’s fortunes. They labored to redraw the map of the Middle East in a way that they imagined would slow down the rise of China and the other giants that are slowly but surely standing on their feet to face up to the post-Cold War superpower.

    All such efforts were bound to fail. The US escaped from Iraq, but only after altering the balance of power and creating new classes of winners and losers. The violence of the invasion and occupation scarred Iraq, and also destabilized neighboring countries by overwhelming their economies, augmenting militancy and creating more pressure cookers in political spaces that were, until then, somewhat stable.

    The war left the US fatigued and set the course for a transition in the Middle East, although not the kind of transition that the likes of former secretary of state Condoleezza Rice had championed. There was no “New Middle East” per se, but rather an old one that is in much worse shape than ever before.

    When the last US soldier scheduled to leave Iraq had crossed the border into Kuwait in December 2011, the US was exposed in more ways than one. The limits of US military power was revealed – by not winning, it had lost. Its economy proved fragile – as it continues to teeter between collapse and “recovery”. It was left with zero confidence among its friends. As for its enemies, the US was no longer a daunting menace but a toothless tiger.

    There was a short period in US foreign policy strategy in which Washington needed to count its losses, regroup and regain initiative, but not in the Middle East. The Asia Pacific region, especially the South China Sea, seemed to be the most rational restarting point, and for a good reason.

    Writing in Forbes magazine in Washington, Robert D Kaplan described the convergence underway in the Asia pacific region. He wrote, “Russia is increasingly shifting its focus of energy exports to East Asia. China is on track to perhaps become Russia’s biggest export market for oil before the end of the decade.”

    The Middle East is itself changing directions, as the region’s hydrocarbon production is increasingly being exported there; Russia is covering the East Asia realm, according to Kaplan, as “North America will soon be looking more and more to the Indo-Pacific region to export its own energy, especially natural gas.”

    But the US is still being pulled into too many different directions. It has attempted to police the world exclusively for its own interests for the past 25 years. It has failed. “Cut and run” is essentially an American foreign policy staple, and that too is a botched approach. Even after the piecemeal US withdrawal from Iraq, the US is too deeply entrenched in the Middle East region to achieve a clean break.

    The US took part in the Libya war, attempting to do so while masking its action as part of a larger drive by the North Atlantic Treaty Organization so that it shouldered only part of the blame when things went awry, as they predictably have. Since the January 25 revolution, its position on Egypt was perhaps the most inconsistent of all Western powers, unmistakably demonstrating its lack of clarity and relevance to a country with a massive size and influence.

    However, it was in Syria that US weaknesses were truly exposed. Military intervention was not possible – and for reasons none of which were moralistic. Its political influence proved immaterial. Most importantly, its own legions of allies throughout the Middle East are walking away from beneath the US leadership banner. The new destinations are Russia for arms and China for economic alternatives.

    President Barack Obama’s visit to Saudi Arabia in late March might have been a step too little too late to repair America’s weakening alliances in the region. Even if the US was ready to mend fences, it has neither the political will, the economic potency, nor the military prowess to be effective. True, the US still possesses massive military capabilities and remains the world’s largest economy, but the commitment that the Middle East would require from the US at this time of multiple wars and revolutions is by no means the kind of commitment the US is ready to impart. In a way, the US has “lost” the Middle East.

    Even the “pivot” to Asia is likely to end in shambles. On the one hand, the US’s opponents, Russia notwithstanding, have grown much more assertive in recent years. They too have their own agendas, which will keep the US and its willing European allies busy for years. The Russian move against Crimea had once more exposed the limits of US and NATO in regions outside the conventional parameters of Western influence.

    If the US proved resourceful enough to stage a fight in the South China Sea and the East China Sea, the battle – over energy supplies, potential reserves, markets and routes – is likely to be the most grueling yet. China is not Iraq before the US invasion – broken by decades of war, siege and sanctions. Its geography is too vast to besiege, and its military too massive to destroy with a single shock and awe.

    The US has truly lost the initiative, in the Middle East region and beyond it. The neo-cons’ drunkenness with military power led to costly wars that have overwhelmed the empire beyond salvation. Now, US foreign-policy makers are mere diplomatic firefighters, from Palestine, to Syria to Ukraine. For the Americans, the last few years have been less a “reality check”, more the new reality itself.

  8. Ananda-USA Says:


    You said ” The green revolution in America is not as successful as in China where the non renewable energy output by China equals the combined energy output of Germany and France (article in Asia Times).”

    TRUE, but China is more desperate than the US to free itself from pollution that is choking its cities and polluting its waters.

    You said “Remember Solyndra? that was but one green company that went belly up.”

    Yes indeed Solyndra was in my neck of the woods (and I bought one of their panels for evaluation), but not because its technology was defective or poorly performing, but because it was too expensive to compete with cheap Chinese solar panel imports.

    After that event, the US levied a huge import duty on Chinese solar panels to protect US manufacturers, but that was the wrong thing to do, because it increased the price of solar and reduced the installation of solar panels in the US putting many small businesses in the solar panel installation business out of work.

    You said “Detroit once the capital of the automotive industry is dying.”

    On the contrary, Detroit is transforming itself from a old-style manufacturing city employing vast numbers of costly unionized employees into a modern-style manufacturing city with fewer employees manning highly-automated production lines. That transformation is visibly painful and obvious but is necessary, as it was in the Steel City of Pittsburgh, PA (where I worked as an R&D engineer for 5 years) where the metamorphosis is largely complete into a clean and profitable engine of high-technology.

    In Detroit, the workers who used to wield wrenches and welding torches have been largely replaced by robots. In their place are highly skilled robot-minders and machine-programmers who are far fewer in number. Workers who could not or would not adapt were laid off or retired, and replaced by a people with greater and different set of skills. This transformation by INCREASING THE PRODUCTIVITY OF EACH WORKER by surrounding and enabling him with expensive capital equipment was the only way that the US could compete in cost with foreign countries manufacturing in the developing world. As an example, the Tesla manufacturing facility (at the Old Toyota NUMMI plant) in Fremont is a marvel of automation at a very high level. Furthermore, Tesla is going to build a GIGA-FACTORY for manufacturing car batteries in the United States with an output that will exceed the combined automotive battery manufacturing capacity of the rest of the world. That is why I made a significant investment in Tesla.

    You said “electric car production is a sham since to charge an electric car when the US energy is basically a coal run energy sector means more coal is being burned with the increase of electric cars thereby defeating the purpose of an environmentally friendly car.”

    NOT TRUE AT ALL, because electric cars displace GASOLINE which emits far more pollutants per unit of energy consumed than grid electricity which is largely generated using NATURAL GAS and Nuclear power plants in the United States. Natural Gas (and Nuclear) power plants are far cleaner than Coal power plants. Even the emissions from coal power plants are scrubbed to eliminate toxic gases (SO2, NO2 etc but nothing can be done about CO2) than is possible using catalytic converters in gasoline vehicles. In contrast, most of the electric power plants in China burn Coal and do not have the scrubbing equipment to eliminate the toxic gases. Therefore, although China is racing ahead of the US in deploying clean renewables and nuclear power plants, they are FAR AHEAD of the US in the amount toxic emissions they pour into their air and their water resources.

    You said “A record number of Americans are now on food stamps and the sum total of them surpass the number of the Great Depression.”

    ABSOLUTELY untrue, but I will concede that the income distribution of the US has become quite bipolar and skewed in favor of the rich while the middle class that formed the broad base of support for the free market is under great stress and earn less in inflation adjusted dollars than their parents did 30 years ago. The economic policies of both parties, but especially the supply side economics of the Republicans, are responsible for this. Both the Occupy Movement from the left and the Tea Party Movement from the right reflect these stresses by the the middle class.

    In my mind, the philosophies of both opposing parties, that protect both the workers and the businesses who together generate the wealth of the nation, are necessary and beneficial; but unwillingness to compromise in the nations interest that leads to gridlock, is detrimental.

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