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Sri Lanka set for record growth in 28 years despite fighting

“We are well on the way for at least seven percent overall growth this year and on track for an eight percent growth in 2007,” Governor Nivard Cabraal told visiting finance ministers from Commonwealth Countries.

The figures indicate that the embattled island nation is set for its best performance in 28 years. The economy gained 8.2 percent, its highest in 1978, a year after the nation embraced an open economy.

The surge in growth follows a dip after the December 2004 tsunami. It was led by aid agencies, foreign and local, who pumped in funds for reconstruction efforts.

It also comes despite an upsurge in violence in a decades-old ethnic conflict that has claimed more than 1,500 lives since December.

The influx of aid funds and money from Sri Lankans working abroad helped foreign currency reserves gain to 2.55 billion dollars as at the end of August, from 2.45 billion dollars at end of 2005.

Sri Lanka has offered new incentives to about 1.5 million overseas workers in an attempt to double remittances by 2007 from 1.92 billion dollars in 2005, Cabraal said.

He said in the first six months of the year, remittances reached 1.36 billion dollars.

The incentives include low-interest housing loans by banks against foreign currency deposits and health insurance plans to encourage more foreign currency remittances.

“Our estimate is that around 30-35 percent of remittances came through the formal banking channel last year, we hope these incentives schemes will encourage people to send more money home,” he said.