Country Report Sri Lanka March 2011

Outlook for 2011-15: International relations

Relations between the UPFA and traditional donors in the West will remain tense. In 2009 the government aggressively dismissed donor concerns about an apparent deterioration in the human rights environment, notably towards the end of the civil war period. The risks inherent in this strategy were illustrated when the EU suspended Sri Lanka's preferential access to its markets under the Generalised System of Preferences-Plus (GSP-Plus) scheme in 2010. The Economist Intelligence Unit nevertheless expects an improvement in Sri Lanka's relations with Western countries in 2011-15 as respect for human rights on the island improves. The government's undiplomatic handling of donors has increased the cost of mobilising foreign financial support in the next few years. Although ties with India and China will continue to strengthen and both countries will provide funds for infrastructure improvements, the terms may be less favourable than those available on concessional loans from established aid donors.

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