COLOMBO, May 1: Sri Lanka’s central bank called on Wednesday for faster reforms and de-regulation after reporting an unprecedented and worse than expected economic contraction last year.

The bank said Sri Lanka’s economy shrunk 1.4 per cent in 2001 compared with growth of 4.5 per cent the previous year. The bank had earlier forecast growth of negative 1.3 per cent for 2001.

It was the first time Sri Lanka’s GDP contracted since independence from Britain in 1948, it said in a statement.

A bank official said its annual report for 2001, finalized on Tuesday and handed over to the government, called for faster reforms and stressed the need for an end to decades of bloodshed on the island.

“Economic progress would depend on restoration of peace,” the bank said.

The central bank forecasts a growth rate of 3.7 per cent this year.

Private analysts see the central bank and finance ministry officials were unable to keep up with the pace demanded by Prime Minister Ranil Wickremesinghe, who came to power in December promising peace and economic prosperity.

Sri Lanka’s two state-owned banks, which account for more than half the domestic banking business, are carrying huge portfolios of bad loans.

The state electricity and oil monopolies are carrying more than 40 big problems for the budget, which recorded a deficit equivalent to 10.8 of the country’s GDP last year.

Finance Minister K.N. Choksy painted a gloomy picture when he presented the 2002 budget in March.—AFP