Sri Lanka won't beg for aid: central bank chief

COLOMBO (AFP) – War ravaged Sri Lanka will not beg for foreign aid even as a 1.9 billion dollar bailout from the IMF has been delayed, the island's central bank chief said on Friday.

"We will never go after donors or lending agencies with a begging bowl. We are capable of standing on our own and raise funds through capital markets," Central Bank of Sri Lanka Governor, Nivard Cabraal, told AFP.

Sri Lanka tapped the International Monetary Fund in March in a bid to stave off its first balance of payment deficit in four years after the island's foreign currency reserves fell to around six weeks worth of imports.

The loan has been put off due to political pressure from the US, Britain and other Western nations over Colombo's handling of the final stages of the battle against Tamil separatists and charges that thousands of civilians were killed.

The United States is the main shareholder in the IMF and its approval is key to the release of the money. But the US has supported calls for a probe into alleged war crimes committed by Sri Lankan government troops.

Despite pressure from the West, Cabraal said he was confident the rescue package would be approved.

The island's 37-billion-dollar economy was caught up in the global economic crisis last year, with exports of garments and tea affected and foreign remittances slowed.

"We have dignity and our own identity in the international community. Sri Lanka does not want to go after anyone for aid with bended knees," Cabraal said.

He added that foreign reserves have picked up in the past several weeks, with money coming from aid flows -- to meet the humanitarian needs of nearly 300,000 displaced people in the north -- remittances and foreign investments.

The central bank was also negotiating a 500 million dollar loan from Libya and another 500 million dollars from an unnamed "friendly country" to help with post-war reconstruction, he said.

"Little by little, the urgency of the IMF loan is easing. I am not saying that we don't need it. The threat of a downturn is receding and Sri Lanka is getting some inflows after the end of the war," Cabraal said.

"The future scenario is very comforting to our foreign exchange situation," he said.

The central bank plans to revise upwards the island's economic forecast for 2009 to between four to five percent, from 2.5 percent to 3.0 percent announced earlier this year.

Sri Lanka's economy posted 6.0 percent growth in 2008, down from 6.8 percent in 2007.

"For a very long time, every time someone spoke about Sri Lanka's economy, they responded saying if not for this war things would be better. Now the war is over and we have a tremendous scope for economic development," Cabraal said.