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| Pause-in-conflict
economy The 1st quarter GDP growth was a massive improvement compared to the 0.1% growth during the corresponding quarter last year. The 2nd quarter GDP growth could be less than the 1st quarter because of the floods and its economic fallout. Nevertheless the forecast is that Sri Lanka would achieve 5.5% growth rate for the year 2003. This target is feasible provided that there is no resumption of full-scale war. Agricultural
production Industrial exports, in terms of value, which dropped by 28% to $ 232 million in April, increased by 58% to $ 366 million in May and dropped by 13% in June compared to the preceding month respectively. The total quarterly industrial exports to the value of $ 915 million during the 2nd quarter was slightly lower than $ 918 million in the 1st quarter. Hence the quarterly industrial export values have been declining since the beginning of this year. The interest rates continued to decline during the quarter under review. The prime-lending rate during the last week of April averaged 11.49% (declining from 11.77% during the last week of March), declined to 10.54% during the last week of May and then to 10.44% during the last week of June. Likewise, the Treasury Bill rate (12 months) dropped to 8.62% during the last week of April (from 9.18% during the last week of March) and further declined to 8.55% and 8.46% during the last weeks of May and June respectively. However, the declining Central Bank interest rates have not been correspondingly reflected in the lending rates of commercial banks to businesses and personal customers. Both the annual average rate of inflation and the point-to-point rate of inflation have been consistently declining since mid-2002 and late-2002 respectively. Continuously declining interest and inflation rates are indications of the stabilization of the macro economy after the disastrous economic performance in 2001. The gross official foreign currency reserves of the country improved considerably by 15% during the quarter under review. The gross official reserves increased to almost $ 2 billion at the end of the quarter under review from $ 1.7 billion at the end of the 1st quarter. Over 80% of the rise in gross official reserves was in April. The rise in gross official reserves in April (in spite of the huge trade deficit and drops in net private remittances and tourism receipts during the same month) was due to the disbursement of the first installment of the Poverty Reduction and Growth Facility (PRGF) by the International Monetary Fund (IMF). The gross official reserves dropped by $ 40 million in May but increased by $ 85 million in June. Remittances from abroad have become a major source of foreign exchange earnings to Sri Lanka. The bulk of the private remittances are from Sri Lankan workers in the Middle Eastern countries. Almost a million Sri Lankans work abroad in the Middle East, Cyprus, Singapore, Malaysia and Italy. The monthly net private remittances continued to drop since March 2003. However, the total net private remittances during the quarter under review were marginally higher than the 1st quarter. Besides the quarterly net private remittances during the first-two quarters of this year have been considerably greater than the first-three quarters of last year but falling behind the last-quarter of 2002. This is real growth as it is in terms of US dollars. On average almost $ 100 million net private remittances (i.e. remittances received minus remittances sent out) have been received during the first-six months of the year. If this trend continues the annual remittances of the current year may exceed last year's total of $ 1,100 million. The pause-in-conflict economy in the North and East (N&E) Province of Sri Lanka is hereby defined as the transitory economy from a conflict economy to a post-conflict economy. The Tokyo donor conference provided a stimulus to the revival of the North and East Provincial economy. Out of the total aid of $ 4.5 billion pledged to Sri Lanka over a period of four years about one-third is expected to be for the rehabilitation and reconstruction needs of the North and East Province. North-east
agriculture For example, in the Kilinochchi district out of the total paddy cultivatable extent of 25,000 hectares only 10,000 - 12,000 hectares were cultivated during conflict-time, which increased to 18,000 hectares during the 2002/2003 Maha season. Likewise, in the Mullaitivu district out of the total paddy cultivatable extent of 17,000 hectares only 8,000 - 10,000 hectares were cultivated during conflict, which increased to 14,000 hectares during the 2002/2003 Maha season (Ceylon Daily News, 15-07-2003: 7). Large extents of agricultural land are still uncultivated because of landmines and high security zones. According to the North-East Provincial Department of Agriculture the paddy production during the 2002/2003 Maha season in the five districts of the North (Jaffna, Kilinochchi, Mannar, Mullaitivu and Vavuniya) was 400,000 metric tonnes (ibid). In contrast, according to the Department of Census and Statistics, only 84,000 metric tonnes of paddy were produced in the North during 2000 (both Maha and Yala). However, the author could not verify the production figures of the North-East Provincial Department of Agriculture. Statistical data on other crops are yet to be made available. Civil
war and poverty According to available evidence the proportion of the poor in the total population of Sri Lanka actually declined between the early-1980s and the late-1990s. In 1980/1 half the total population was poor but in 1996/7 only 31% of the population was poor using a higher poverty line. That is, the income or consumption poverty seems to have dropped. However, we have to remember that post-1983 poverty data does not incorporate the N&E Province and therefore the decline in poverty in 1996/7 may have been overstated. Yet it would be reasonable to infer that the incidence of poverty declined between the early-1980s and the late-1990s though we cannot be sure by how much. Though in the rest of the country the incidence of poverty seems to have declined during two decades of civil war it was the contrary in the N&E. In the author's judgement around 50% of the N&E population could be under the higher poverty line. This is because of massive displacement of rural farming communities, fishing communities, destruction of farming and fishing equipment and private properties resulting in loss of livelihoods to hundreds of thousands of people throughout the N&E and adjacent areas. The Northern Province is the poorest province in terms of per capita income and the Eastern Province is the next poorest. According to the Department of Census and Statistics, in the early-1980s the Sabaragamuwa Province was the poorest in terms of per capita income and the Uva Province second poorest, which is now being occupied by the Northern and Eastern Provinces respectively. The per capita income of the Northern Province was LKR 37,206 in 2000 while the national per capita income was nearly LKR 63,000. According to a survey undertaken by the Council of NGOs in the Jaffna District in September 2002 the unemployment rate in the Jaffna district was 28% while at the national level (baring the N&E Province) it was only 8%. The unemployment rate among women was 32% whereas among men it was 23% in Jaffna. The underemployment rate of 37% in Jaffna was split into 60% among women and 8% among men. Although no data exists it is understandable that the unemployment and underemployment rates in the Vanni (encompassing Kilinochchi, Mannar, Mullaitivu and Vavuniya districts) would be considerably higher than that of Jaffna. The huge unemployment and underemployment problems as a result of the civil war are a major cause of poverty in the N&E. Pre-war
surplus However, due to massive displacement of populations, laying of landmines in agricultural lands, absorption of highly fertile agricultural lands cum coastal areas into high security zones, economic embargo on the N&E covering fuel, fertilisers and pesticides, restrictions on the transport of local produce to the rest of the country, lack of electricity and severe time and distance restrictions on fishing, a surplus agrarian economy has been transformed into a subsistence/survival economy. For example, in 1980 the N&E Province produced almost one-third of the total production of paddy in the country, which dropped to a quarter in 2000. In 1980, nearly 40% of the onions produced in the country were in the N&E, which dropped to nearly 30% in 2000. Little more than a quarter of the total chilli production in the country in 1980 was in the N&E, which had dropped to just 8% in 2000. The Northern Province accounted for 13% of the total potato output in the country in 1980, which dropped to less than 1% in 2000. In 1980 the N&E accounted for 56% of the total fish catches of the country, which dropped to just 16% in 2000. The backwardness and relative deprivation of the N&E economy is not only in terms of per capita income (i.e. in terms of income or consumption poverty) but also in terms of social indicators (i.e. in terms of human poverty). For example, the percentage of households with access to safe water in the country (as a whole) is 45% whereas in the N&E it is only 20% (less than half the national average). Nationally 73% of the total households do have sanitary facility whereas only 48% of the households in the N&E do. While nationally 17% of babies are born underweight in the N&E 26% of the babies are born in like manner. Similarly, while 30% of the children under-5 years are underweight nationally it is 46% in the N&E. Almost 50% of the pregnant women in the N&E are malnourished. Almost 20% of the births take place at home in the N&E whereas nationally only 4% do so (five times higher than the national average). As a corollary the maternal mortality ratio (i.e. death of mothers during every 1,000 live births) in the N&E is 81 while it is only 23 in the country as a whole (three and a half times the national average). It is important to remember that despite the untold hardships unleashed by the gruesome civil war the N&E population did not experience starvation or hunger as in some other internal war-torn regions such as Southern Sudan. The inflow of foreign remittances from kith and kin that fled abroad as refugees and assistance from international relief agencies and the Government of Sri Lanka mitigated the impact of the war on the people of N&E. IDPs
return This is taking place spontaneously against the advice of the UNHCR. The UNHCR would not encourage resettlement of IDPs unless and until the landmines are completely cleared in suspected lands. Yet, the fact that the IDPs are spontaneously returning to their places of origin (vast majority to Jaffna) even before the clearance of landmines is complete is a testimony to the sense of confidence and security felt by the ordinary public. Moreover, according to anecdotal evidence, the extent of crop agriculture cultivation in the N&E has increased significantly in the past 18 months. Since agricultural crops are seasonal the output data are still not available. However, fish catches in the N&E have tremendously improved during 2002. While the total fish catches in the N&E were 44,000 metric tonnes in 2000 it almost doubled to 85,000 metric tonnes in 2002. The foregoing evidence indicates the enormous potential out there for economic revival and poverty alleviation in the N&E Province. However, uncleared landmines, high security zones, remaining restrictions on fishing, arbitrary taxation and the general political and economic uncertainty appear to be some of the non-market institutional impediments for the full realisation of the peace dividend in the N&E. |
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