Colombo, Nov. 10 (Reuters): A political tussle between Sri Lanka’s President and Prime Minister could delay foreign aid to the country, a World Bank official said today.
Analysts said investment, tourism and economic growth could also be affected if the crisis lasts for too long.
Donors pledged about $4.5 billion in aid earlier this year to rebuild the war-torn island, but said progress was needed at peace talks with Tamil Tiger rebels.
“If you were going to seek funds for a new project, donors would say: ‘Let’s just see what is going to happen’,” Peter Harrold, the country director of the World Bank, said.
Ongoing aid projects would not be affected, Harrold said.
He also didn’t say whether the aid package announced at a donor conference in Tokyo in June this year was in jeopardy.
Prime Minister Ranil Wickremesinghe and President Chandrika Kumaratunga, who are elected separately, have locked horns over the handling of a peace process with Tamil rebels.
Kumaratunga has said the government was giving too many concessions to the rebels. She sacked three cabinet ministers and suspended parliament last week.
The Colombo stock market has dropped 13 per cent and lost $450 million in value since the President’s action, and wide media coverage of a state of emergency that was not implemented is expected to reduce tourist arrivals.
International oil firms bidding for 100 state-owned petrol stations worth between $40 million and $80 million were nervous after the President called the emergency, and an official close to the sale said they had rescheduled meetings.
The government plans to divest a stake in Sri Lanka Telecom Ltd, and invite oil companies to explore the island’s seas next year, both of which will depend on the state of the peace process, an analyst said.
Tamil Tiger rebels have said they will be patient during the political crisis that could end in fresh elections.
The economy is officially projected to grow between 5.5 and six per cent this year and 6.5 per cent next year.
The IMF said last week it would wait until clear policies were announced on the government budget before approving a second tranche of $80 million under a $567 million loan package.