Civil strife in Sri Lanka will make the economys growth rate in 1987 its slowest in a decade Sri Lankan finance minister Ronnie de Mel said here. He tolds in an interview that he expected gross domestic product to expand by only four pct in 1987. He said it averaged five pct over the past three years. For the first two years after the present troubles began in 1983 production of key commodities like tea rubber coconuts and rice kept up he said. Tamils on the island are fighting for a seperate state. De Mel said: Private sector production in fact grew by 25 pct in 1984 and 20 pct in 1985. But last year things took a turn for the worse. He said prices of tea the main export fell to half their 1984 levels. World prices of rubber and copra also fell. There was also a decline in income from tourism and remittances from Sri Lankans working in the Middle East. He said any savings from the worldwide drop in crude oil prices were wiped out by the cut in commodity earnings. To add to all this we have had between January and March this year the worst drought I have seen in my life he said. De Mel said the drought would seriously affect agricultural production. He said because of the fighting in the country defence expenditure was now about 20 pct of the national 1987 budget of 70 billion rupees. Sri Lanka planned to borrow about 600 mln dlrs in 1987 from the World Bank and the Sri Lanka Aid Consortium which comprises members of the Organisation for Economic Cooperation and Development (OECD) he said. We also plan to ask the International Monetary Fund for another 200 mln dlrs through a structural adjustment facility and a compensatory financing facility to balance our export revenue cuts de Mel said. He said despite the unrest Sri Lanka had succeeded in keeping its total foreign debt to three billion dlrs by avoiding borrowing from commercial banks. Commercial bank debt accounts for only 15 pct of our total foreign debt he said. He said the Mahaweli hydro-electric project was nearing completion. It was likely to cut dependence on oil imports. The project will more than treble our hydro-electric power from 300 megawatts to nearly 1000 megawatts de Mel said. He said 20 new townships would rise around the project which is in the north-central part of the island. It was expected to irrigate 1.2 mln acres of land and indirectly provide employment for 500000 landless families. De Mel said Tamil guerrillas were waging a war of attrition in the islands north and east.
SRI LANKAN MINISTER SEES SLOWEST GROWTH IN DECADE