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Sri Lanka - Strengthened adjustment for growth and poverty reduction (Inglés)

The Government of Sri Lanka embarked on serious economic restructuring efforts in 1989 to : (i) stabilize the economy; (ii) rationalize the public sector; (iii) encourage private investment; and (iv) improve its poverty programs. Economic growth resulted in 5-6 percent a year in 1990 and 1991, however for the economy to enjoy sustainable growth, it became essential that the macroeconomic stance be tightened immediately. Two worrisome signs in the economic pattern need to be removed : (a) public investment is plummeting and (b) external competitiveness is eroding. The Government needs to implement appropriate wage policies, restructure the public sector pension scheme and improve further cost effectiveness of poverty programs. In addition, the Government needs to continue privatizing commercial public enterprises, and allow market forces to play a significant role in management of public sector banks and tree crop plantations; privatization should be considered in the latter two sectors as well. The Government also needs to resort increasingly to flexible foreign exchange rate management. The report briefly discusses four reform areas which are seen as high priority: (i) financial institutions; (ii) the environment for foreign direct investment; (iii) labor legislation; and lastly, (iv) physical infrastructure. Finally, the Government needs to make further progress in resolving the civil conflict.

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