Resource information
Following the cessation of hostilities
in May 2009, the Government of Sri Lanka has announced a
suitably ambitious macroeconomic vision to capitalize on the
peace dividend. Its goals include growing at 8 percent or
more per year and lowering government indebtedness from
around 80 to 60 percent of GDP by 2015. This paper's
main finding is that while some post-conflict bounce is only
to be expected, sustaining high growth presents significant
challenges. A substantial rise in the national investment
and savings rates will be needed to sustain growth rates of
8 percent even when accompanied by a significant rise in
total factor productivity growth. With the government's
balance sheet constrained by its desire to lower public
indebtedness, private investment will need to become the
engine of growth. This places high priority on better
infrastructure, clear signals about the relative roles of
the public and private sectors, and hard budget constraints
and competition both to strengthen the investment climate
and spur technological upgrading in pursuit of faster
productivity growth.
