Cost of Sri Lanka's war a vital investment, Governor of Central Bank says

The cost of Sri Lanka's four-year war on terrorism from 2006-2009 amounted to 5.5 billion US dollars but it was a vital investment by the government and the people, the governor of the Central Bank, Ajith Nivard Cabraal has said.

Testifying before the Lessons Learnt and Reconciliation Commission (LLRC) appointed by the President to probe the events during the war, Cabraal has said many governments before the present administration did not pursue the military option to end the terrorism that plagued Sri Lanka for three decades due to the fears of massive cost a war would incur and as a consequence, tough economic decisions that would need to be taken.

The governor, presenting figures on the expenditure for the four years the government waged the war against the terrorist group Liberation Tigers of Tamil Eelam (LTTE), has said that contrary to popular belief, Sri Lanka spent only about 4% of its GDP on defence over the 4 years, 2006 to 2009.

The expenditure that amounted to 605 billion rupees (5.5 billion US dollars) included cost of aircrafts, ships, tanks, ammunition, other equipment, training, food for soldiers, uniforms, etc., Cabraal has pointed out.

He has told the LLRC considering the victorious outcome of Sri Lanka's war and compared to what other countries in the world use for battling terrorism this amount for a country that has been plagued by terrorism for decades indicates that the government has used its resources efficiently and productively.

Ending the terrorism benefitted the country economically in extraordinary proportions, the Governor has said pointing out that the country returned to the high economic growth trajectory of 8% after the war ended.

The government was able to implement massive development projects in areas of ports, energy, tourism and the post-war political and economic stability improved the investor confidence.

Since the regular destruction of property and loss of lives that took a heavy toll on the economy and morale of investors had been eliminated with the terrorism, the country's private sector are seizing new opportunities, Cabraal has told the Commission.

Marked improvement in productivity has been observed and improved fiscal management has led to better macro-economic fundamentals, the Governor has stressed.

All the benefits that were brought about by ending the terrorism had clearly shown that the investment on defence has paid off, Cabraal has noted.

The Central Bank chief has warned the Commission that there are massive global misinformation campaigns carefully designed to affect Sri Lanka's economy, funding sources, and other economic concessions.

Citing the loss of European Union's tariff concession GSP+ and the delay in approving the International Monetary Fund's 2.6 billion dollar Stand-By Arrangement as examples, the Governor has said that "every perceived negative factor from an economic point of view was given deliberate and wide publicity, locally and internationally," to hurt Sri Lanka's economy.

The Governor has noted that the economy wise the country has achieved several successes despite the negative campaigns.

There was no fall-out from GSP+ withdrawal, he has told the LLRC, and international bond issues have been oversubscribed indicating the investor enthusiasm. Removal of war risk insurance premiums and relaxation of travel advisories were another positive outcomes, he has illustrated.

The government had to launch and maintain a massive effort to convey the positive features of Sri Lanka's economy and even in the future, these efforts have to be continued, in the interest of economic stability, he has stressed.


Full presentation made by the Governor of Central Bank