June 26, 2009 / 6:48 PM / 9 years ago

INTERVIEW-Sri Lanka says critical juncture for IMF loan

* Colombo is seeking $1.9 billion IMF loan

* Minister says denying Colombo funds ‘counterproductive’

* Sri Lanka ended 25-year war with rebels in May

By Paul Eckert, Asia Correspondent

WASHINGTON, June 26 (Reuters) - Sri Lanka’s post-war reconciliation process needs international financial support, its trade minister said on Friday, urging swift action on Colombo’s request for a $1.9 billion International Monetary Fund loan.

G.L. Peiris, Sri Lanka’s minister of export development and international trade, said it would be "wholly counterproductive" to deny Colombo resources as it moves to heal wounds from a bitter 25-year war that ended last month.

Sri Lanka declared victory over the separatist Tamil Tigers on May 18, but remains under Western pressure over the deaths of civilians in the waning months of the conflict.

Sri Lanka’s request for IMF financing got mired in politics after the United States and other Western states were hesitant to move while the final days of the Indian Ocean island nation’s war raged, with high casualties.

The IMF has said it is in talks with the authorities on details of an economic program.

Peiris, visiting Washington for meetings with the IMF, World Bank and the U.S. government, said further delays would end up "hurting the achievement of the objectives in which they and we are both interested."

"If the developed countries are going to cut off resources at this time, that is ironical, because now is a time to infuse greater resources," he told Reuters in an interview.

Sri Lanka’s government needs to resettle war refugees, create jobs in depressed areas formerly run by the Tamil Tigers, and get the economy growing again amid a world recession that has hurt textile and tea exports, he said.

Politically, Colombo is trying to re-integrate a country riven along ethnic lines and fashion a political system that includes minority Tamils — a process that needs economic development to succeed, said Peiris.

"Frustration and disenchantment are the last things we need, because they are going to set us back," he said.

Peiris said he delivered a similar message in London and other European capitals, where some governments angry at Colombo’s war conduct have threatened to suspend the "GSP plus" scheme that allows duty free exports from Sri Lanka.

The textile industry, which tallied exports of $3.2 billion in 2008, is largely based in rural and underdeveloped areas, he said.

"If GSP plus were to be withdrawn, the hit would be taken not by the government of Sri Lanka, but by the most vulnerable sections of the community," said the minister. (Editing by Mohammad Zargham)




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