Civil strife in Sri Lanka willmake the economy's growth rate in 1987 its slowest in a decade,
Sri Lankan finance minister Ronnie de Mel said here.
    He told Reuters 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 1,000 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 500,000 landless families.
    De Mel said Tamil guerrillas were waging a war of attrition
in the island's north and east.
 REUTER
