Will economic growth give political space for Sri Lanka to escape poverty?

SINGAPORE September 15, 2006 (LBO) – In addition to curries, saris and a passion for cricket, Sri Lanka shares similar problems with South Asian countries, but rapid economic growth is now creating the 'political space' for policy and institutional reforms, the World Bank said. "The Sri Lankan government was (last year) elected on a platform for subsidies in areas like agriculture, but now we gradually see a shift in stand with the government subtly moving away from subsidies in areas like oil, which is encouraging," Shantayanan Devarajan, the bank's chief economist for South Asia told reporters here.

Despite a blistering 7.9 percent growth for the six months to June, and a three percentage drop in national poverty rates (mainly as growth in centered around the economically rich western province), Sri Lanka has to tackle social issues, corruption and ongoing conflict to rise out of the poverty trap, he said at the launch of a new report: "Can South Asia end poverty in a generation?"

South Asia has had a strong impressive growth. But there remains long standing problems of social and economic exclusion, illiteracy, ill-health, conflict, corruption and confrontational politics, the report said.

Rising inequality is holding back market oriented reforms and