Sri Lankan economy needs to be put through "critical structural reforms urgently" to develop economic and social infrastructure essential for continued growth, the central bank said here Thursday.

Issuing the 2005 Annual Report, the bank said that poor infrastructure facilities such as roads, electricity, telecommunication, transportation, water supply, health and education have been impediments on serious economic growth in the island.

It said the economy had grown at a rate of 6 percent throughout 2005 despite the devastation caused by the tsunami tidal waves which struck the island's coastal belt on December 26, 2004.

The inflation which had hit 15.9 percent by February 2005 had declined to 8 percent by the end of the year. All major economic sectors had performed creditably with services sector contributing 59.3 percent to the growth during the year.

The rate of investment, though recording a 1.5 percent increase from 2004, was still below the desired levels, the bank said.

The country's gross official external reserves improved to 2.38 billion U.S. dollars, leading to improved debt servicing capacity.

The bank calls for reforms in the public sector institutions to enhance service delivery and warns that most of the existing subsidies, concessions and measures of protection have imposed serious social and economic costs though they benefit a selected few.

It also says poorly targeted and undue subsidies drive budgetary resources away from productive investment.

Source: Xinhua