Hoping for Peace Dividend in Sri Lanka

Peace is the highest priority for Sri Lanka and only with peace will the country see economic growth, agreed donors who pledged $860 million in financial support at the Sri Lanka Aid Meeting in Paris on November 18.

Donors stressed the need for accelerated structural reforms, noted that Sri Lanka needed to improve its record on implementing projects, and called on the government to ensure that individual rights are not violated.

The Sri Lanka delegation was led by the Honorable G.L. Pieris, Minister of Justice and Constitutional Affairs and Deputy Minister of Finance and Planning. The Aid Group Meeting was chaired by Ms. Mieko Nishimizu, Country Director, South Asia Region, the World Bank.

Deploring the cost of the hostilities and human suffering, donors expressed hope that a peaceful settlement could soon be reached. They commended President Chandrika Bandaranaike Kumaratunga for his efforts to end the country's civil war that errupted in 1983. Donors added that reconstruction and lasting peace would only be possible under conditions of macro-economic stability and economic growth.

While acknowledging recent government efforts to protect human rights, as well as legitimate security concerns, donors called for continuing vigilance to ensure that individual rights are not violated.

Minister Pieris described the government's two-pronged peace strategy involving a military response combined with amendments to the constitution to devolve greater powers to the regions. To succeed, this strategy needs to be buttressed by a strong economy. The delegation also briefed the donors on reconstruction plans currently being prepared.

On Economic Reform

To promote private sector-led growth and employment, donors stressed the need to accelerate structural reforms and reduce the fiscal deficit. Donors endorsed the government's goal of creating jobs and alleviating poverty through faster economic growth. A market-friendly environment, conducive to private investment and job creation, and social programs are key to realizing these goals.

Donors commended the government for its progress in privatization, including efforts underway to sell controlling shares in the telecommunications agency and the national airline. They urged the government to take comparable steps in the energy, ports, and banking sectors, while emphasizing the need to protect the environment and workers.

Donors also emphasized the need for stronger and more consistent policies to encourage private investment in infrastructure.

On Good Governance

Donors touched on steps the government must take to improve the efficiency and quality of social sector programs. As part of this effort, donors encouraged the government to continue strengthening its partnership with NGOs.

Public administration reform was seen as a high priority, both to reduce the cost of the civil service and to make government more responsive to the needs of a modern, liberalized economy. Donors noted the importance of transparency in this process.

Having pledged $860 million in financial support to Sri Lanka, donors noted that the country had to improve project implementation to actually receive disbursements from the pledge.

Donors and the government agreed to reconvene a special meeting for the purpose of approving additional assistance in the event of peace. In the meantime, they offered continuing support for ongoing relief and rehabilitation activities. For more information, call Raymond Toye at 33-1-40-69-30-28, fax 33-1-47-23-74-36, email at rtoye@worldbank.org. or Rebeca Robboy at (202) 473-0699, fax 522-0321 or email at rrobboy@worldbank.org