DEVELOPMENT BULLETIN-SRI LANKA: Slimmer Pickings At Paris Aid Meeting

By Feizal Samath Reprint | | Print |

Feizal Samath

COLOMBO, May 23 1998 (IPS) - Sri Lanka has been a favourite for foreign donors who have ploughed sizable sums of cash into its war-torn economy in the past decade, but this year its share is likely to be slimmer with the global aid pie shrinking.

Colombo may not get much more than 700 million dollars in concessional foreign aid at next week’s annual Paris aid group meeting, which is some 150 million dollars less than what it was pledged last year.

The problem is that the 20 or so donor nations attending the meeting, organised by the World Bank, have themselves slashed development aid to overcome their domestic fsal problems, compounded in fact by the financial crises in East Asia.

Countries like Japan, which was Sri Lanka’s most generous aid disburser, has cut aid flows by 10 percent, and also rechanneled it to help its neighbours in East Asia, who desperately need the emergency monetary support.

“I believe that even if the Sri Lanka delegation does extremely well at the Paris meeting, there is not going to be much of a chance for overall pledges to be above 700 million dollars,” the World Bank’s representative in Colombo, Roberto Bentjerodt told IPS.

The Paris meeting, from May 26 to 28, is an annual feature, and the quantum of pledges made there is considered a reflection of the donor community’s confidence in the country.

According to Bentjerodt, the 700 million dollars that Sri Lanka can expect this year would still represent a substantial commitment in the context of the shrinking aid flows — and proof of continued donor support for the government.

“This (low amount) by no means should be seen as a lack of confidence by the donor community in Sri Lanka and her economic and social policies. It is just a fact that the pool of aid resources that is availabe is shrinking very fast,” he said.

In the past, Sri Lanka’s governments have aimed to get the maximum at the aid group meeting and then used the pledges to claim political dividends at home. But this year, the People’s Alliance government has conceded the aid environment was tough.

Deputy Finance Minister Professor Gamini Lakshman Peiris who is leading the delegation to Paris admitted that “the global environment for aid is rather unfavourable and western nations see the need to pump in more money into East Asia to revive those economies and alo safeguard their own investments.”

Peiris said the government’s main effort was to ensure that it gets as much aid as possible at the Paris meeting and also ensure the proportion remains the same.

He said the country reports prepared by the World Bank, the International Monetary Fund (IMF) and the Asian Development Bank showed a confidence in the government’s handling of the economy, proven by the significant increase in productivity and growth.

World Bank’s Bentjerodt was optimistic that Sri Lanka would continue to be favoured by donors. “Sri Lanka has received special treatment from donors in the past for a variety of reasons including significant achievements in human development and sympathy for the problems faced by the country,” he said.

According to World Bank figures, concessional aid — which is what Sri Lanka gets and which is a fraction of total aid flows — to the world’s poorest countries fell to 37 billion dollars last year from 40 billion dollars in 1996.

At the same time, official development finance in terms of net flows fell to 44.2 billion dollars in 1997 from 56.4 billion dollars in 1990, states the World Bank’s Global Finance Report for 1998 released last month.

Financial experts point to an overall global aid volumes have been cut by half in the 1990s, if one is to take into account the purchasing power of the dollar at today’s rate and in 1990.

Sri Lanka’s dependence on aid infusions has grown even as the war in the island’s north and east drags into its sixteenth year. The island’s defence budget has swelled over the years by four times since the war started in 1983.

But for the war, Sri Lanka, which was on its way to becoming a newly industrialised country (NIC), had hoped to become a regional financial centre by mid-1985.

Nevertheless, economic growth levels have climbed almost miraculously after violent bouts of fighting. Last year, the growth rate was 6.4 percent — much higher than its neighbours in South Asian — from 3.8 percent in 1996 when the war and a series of crippling public setor strikes curbed growth.

Sri Lankan economic planners have been praised by the World Bank and IMF for a judicious mix of policies that have curbed government spending, raked in high revenue from the sale of state firms and kept the budget deficit in check.

The Paris meeting will also, for the first time, devote a full- day for discussions on social progress and human development in Sri Lanka, unlike at previous meetings where the emphasis was on economic and political strategies.

Sri Lanka’s social indicators like low infant and maternal mortality rates and a very high literacy rate, have made it a model for developing nations.