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INSTANT VIEW-Sri Lanka ruling alliance wins parliamentary polls

[Reuters, Friday, 9 April 2010 13:14 No Comment]

Sri Lanka’s ruling alliance won a majority in parliament on Friday as votes were still being counted, in an election expected to entrench President Mahinda Rajapaksa’s political dominance.

The following are some analysts’ comments and interpretations of the results:

ANUSHKA SHAH, ECONOMIST, CITIGROUP

"We view election results as positive from a policy continuity perspective. Given that the election manifesto focuses largely on infrastructure development, results bode well for infrastructure development … which would help spur investment growth, which is required to come in at a 30 percent level versus 25 percent currently in order to achieve the central bank’s medium term growth estimate of 7-8 percent.

"While the victory was largely on the cards, it’s likely to be perceived positively for the market. However, we look for further clarity on the fiscal front, particularly on the budget, and IMF funding as a key in the coming months."

AMAL SANDARATNE, ECONOMIST AT FRONTIER RESEARCH

"A strong government, if it chooses, can take tough steps on the fiscal side, which is probably the biggest immediate constraint foreign investors have concerns about. When they are strong it is easy for them to go easy on salary hikes, cut subsidies, raise revenues. They can take unpopular measures in the short term which will reap long term benefits.

"If you have a strong government if there is anything unpopular the IMF wants you to do, the government has choice of taking steps and it has flexibility. Otherwise it always has to rely on its coalition partners. Overall, economically, a strong government is good."

SAMANTHA AMERASINGHE, ECONOMIST AT STANDARD CHARTERED BANK IN COLOMBO

"We view the incumbent government’s return to power with a clear majority as favourable for investors and the markets. The end of electoral uncertainty which was holding back investors since the presidential elections in January is now over. The potential stability of another six-year term for the ruling party augurs well for policy continuity in terms of development plans for the country and will boost investor and consumer confidence in the near-term.

"The clear mandate handed to the ruling UPFA party, together with the anticipated economic rebound and improving external environment, would provide a unique opportunity for the administration to carry out the necessary fiscal reforms and rationalise the public sector.

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