War will not stop Sri Lanka development - president

Sri Lanka would not cut funds for the nation's vital infrastructure development, despite fighting a continued bloody civil war, the country's president said on Tuesday.

President Mahinda Rajapaksa who is also finance minister said economic development and elimination of terrorism should be done simultaneously.

"We will implement all the infrastructure projects to develop the country while successfully facing terrorism," Rajapaksa said after releasing the 2007 central bank annual report.

"We will never take a step back on eliminating terrorism despite some people saying the economy is collapsing due to war," he said.

A suspected Tamil Tiger suicide bomber killed Sri Lanka's highways minister and at least 13 other people attending a marathon race near the capital on Sunday.

The Tigers, who are fighting for an independent state in the north and east of the island, have waged a 25-year civil war that has killed an estimated 70,000 people.

Sri Lanka achieved 6.8 percent economic growth in 2007, down from last year's 7.7 percent and less than the forecast 7.5 percent, the central bank said in a statement on Tuesday.

Sri Lanka has achieved over 6 percent growth for the past three years and forecast growth in 2008 is 7 percent, but the bank said the country needed growth in excess of 8 percent in the medium-term to carry out a 10 year development programme by 2016.

It said investment needed to be channelled into competitively priced energy, telecommunications, drinking and irrigation water, roads, ports, airports, health and education.

"The slow progress in the implementation of some planned infrastructure projects announced in the 10-year vision needs to be addressed as a matter of priority sooner rather than later," the central bank said.

Inflation in Sri Lanka rose to a 17 year high of over 20 percent in 2007, before the central bank introduced a new index. The new inflation index in March was 17.7 percent.

The central bank said it hoped to bring down inflation to 10-11 percent by the end of 2008, but said much depended on external global economic factors. It blamed soaring global oil prices and high food prices for the record high inflation.

But the International Monetary Fund and Asian Development Bank says loose fiscal and monetary policy are behind high inflation.

Source: Reuters