Announcement of Sri Lanka Aid Group Meeting on May 8, 1978

' FOR IMMEDIATE RELEASE- . ' •world Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. • Telephone: (202) 393-6360 May 8, 1978 SRI LANKA AID GROUP MEETING The following announcement was issued at the World Bank's European office in Paris: The fourteenth meeting of the Sri Lanka Aid Group was held in Paris under the chairmanship of the World Bank. The following countries were represented: Australia, Canada, France, Germany, Japan, the Netherlands, Norway, Sweden, the United Kingdom and the United States. Representatives of the .International Monetary Fund, the Asian Development Bank, the United Nations Development Pro- gramme and observers from Austria, India, Italy, Switzerland and the Organiza- tion for Economic Cooperation and Development also attended. The Sri Lanka delegation was led by Mr. Ronnie de Mel, Minister of Finance and Planning . • Sri Lanka's Minister of Finance described the high expectations of the new government following the massive mandate r~ceived in the July 1977 elec- tions, and outlined the wide range of pol ftical and economic steps taken in its first eight months in office. Two documents were issued by the govern- ment to the aid group entitled Sri Lanka - Medium Term Prospects and Policies and Summary Description of Projects fo~ the Sri Lanka Aid Group Meeting. As indicated in the documents, and in the World Bank's report, the government had inherited a run-down economy. The ability to maintain Sri Lanka's social achievements had been seriously eroded by a conspicuous paucity of resources. This reflected the failure to exploit the full growth potential of the economy: there had been a dimunition in the rate of savings, a lack of well conceived investment projects .and a misallocation of resources. The public sector had been beset with serious administrative and managerial deficiencies. The private sector was jeopardized by threats of nati'onal isation and a proliferation of quantitative and price controls. Successive administra- tions had shirked the tough decisions required, contributing to slow growth and rising unemployment. The Sri Lanka delegation outlined the policy measures taken in .the budget of November 1977 to revive and resuscitate the economy. The budget was seen as a means of providing a climate in which ~ustained economic development could t~e place. The govemment was aware, however, of the need for further measures, and had, therefore, begun the task of evolving a consistent medium • term development strategy for the period 1978-82. This included improving the institutional framework for planning and developing a medium term investment program.  - 2 - The Sri Lanka delegation emphasized the priority attached by the new government to rapid acceleration in the implementation of the Mahawel i Ganga Development Program (which seeks to develop the resources of Sri Lanka's • largest river, the Mahaweli Ganga}. This effort would require a substantial increase in the level of investment. At the same time, the large rehabil i- tation needs of the entire economy need to be urgently addressed. This 1t10uld require not only a major additional effort at domestic resource mobil iza- tion and export promotion, but also foreign assistance at a level substan- tially above that obtained by Sri Lanka in the recent _past. Aid group members expressed appreciation of the bold and courageous steps the new government had taken to restore the growth process while main- taining Sri ~anka's impressive social achievements. The Aid group applauded Sri Lanka.'s stated intention to take further measures to mobilize domestic resources, and promote·exports. It welcomed the development of the invest- ment program and the efforts being made to rebuild the depleted pipel inci of projects available for external finance. In this context Aid group members emphasized the importance of finding the right balance between imaginative new programs like the acceleration of the Mahawel i Program, to which the government attached such high priority, and programs designed to exploit the many opportunities throughout the economy to raise output and employment in the short and medium term. The Aid group discussed a joint statement prepared by the government • of. Sri Lanka and the World Bank on the current status of efforts to accelerate the Mahawel i Ganga Program. Several members expressed their interest in providing technical and financial assistance in implementing the program and emphasized the importance of a proper overall management of the program. There was broad support for the proposal that donors treat Aid requirements for Mahaweli as additional to regular Aid programs for Sri Lanka. The statements by members gave reasonable assurance of contributions of external resources for an accelerated implementation of the Mahaweli Program pending the outcome of the feasibility studies now under way and to be begun shortly. Actual pledges by individual donor governments for Mahaw,el i would be made after costs have been estimated by these feasibility studies. Aid indications for 1978 for programs other than Mahawel i were well above actual commitments for 1977. • - 0 -