Sri Lanka

Sri Lankan Prime Minister says economy is in crisis

Colombo (dpa) - Sri Lanka is facing an economic crisis and has to borrow to repay state debts, Prime Minister Ranil Wickremesinghe said on Thursday.

Responding to increasing protests from opposition parties about the rising cost of living in Sri Lanka, Wickremesinghe declared in an address to the nation that the 19-year war with the Liberation Tigers of Tamil Eelam movement (LTTE) was one of the main reasons for the breakdown of the Sri Lankan economy.

''We are still repaying for the arms purchases. Even if peace dawns and the war ends we will have to keep paying for our previous military purchases until the year 2008,'' he said, pointing to national debts amounting to 142 million dollars.

The government and the Tamil rebels are currently observing a cease-fire ahead of proposed peace talks under a Norwegian backed peace initiative.

Wickremesinghe, who took over power in December last year, blamed the former People's Alliance (PA) government for mishandling the economy and causing the crisis, but added that a drought and subsequent power cuts early this year had aggravated the situation.

The government was borrowing money to repay loans and hoped to raise another 218 million dollars through privatization programmes, he said, but all of this income would have to be used to repay state debt.

Last year the country's economic growth rate dropped to zero for the first time since Sri Lanka became independent from Britain 52 years ago.

The war against the Tamil rebels has cost the government nearly 25 per cent of its annual budget.

The cease-fire between the government and the Tamil rebels has been in force from December 24 last year after both sides unilaterally agreed to end hostilities, and since February 23 the government and the rebels have been maintaining the truce with an agreement between the two sides. dpa da emc sc

AP-NY-07-04-02 1116EDT

Copyright (c) 2002 dpa Deutsche Presse-Agentur GmbH
Received by NewsEdge Insight: 07/04/2002 11:16:54

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