Saturday, September 25, 2010

IMF approves US$ 212.5 million fourth tranche of SBA to Sri Lanka



Colombo Page
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The Executive Board of the International Monetary Fund (IMF) Friday completed the fourth review of Sri Lanka's economic performance under the Stand-By Arrangement (SBA) and approved an immediate disbursement of about US$ 212.5 million.

Under the US$ 2.5 billion SBA approved by the IMF in July 24, 2009, the IMF has so far disbursed a total of about US$ 1.27 billion to Sri Lanka.


The Executive Board today also concluded the 2010 Article IV consultation with Sri Lanka, a press release issued by the IMF said.

Following the Executive Board's discussion on Sri Lanka, Murilo Portugal, Deputy Managing Director and Acting Chair, has said that Sri Lanka's performance under the program has been satisfactory as overall economic conditions are improving and the economy is likely to show strong growth this year on the back of improved fundamentals and political stability.

Sri Lanka recorded an economic growth rate of 8.5 percent in thee second quarter of 2010, the highest ever recorded quarterly GDP growth since 2002.

The Acting Chair has pointed out that "sustaining high, socially inclusive growth will require substantially higher levels of private investment, underpinned by broad-based structural and financial sector reforms."

Portugal has said that the current favorable environment allows the authorities to focus on addressing the many challenges that remain, particularly in the fiscal and financial sectors.

"Policies will be geared toward preserving macroeconomic stability, ensuring external competitiveness, facilitating capital market development, and improving the investment climate," he has stated.

The IMF official has highlighted that fundamental tax reform, including reform of the investment promotion regime, is central to achieving the government's budget deficit reduction targets while creating the fiscal space for reconstruction and infrastructure investment, as well as social spending.

In this regard, the IMF says the 2011 budget will be the key to demonstrate the government's continued commitment to the program's goals.

The IMF says further improvements in monetary policy formulation will provide useful support for macroeconomic stability and the country's Central Bank now in a position to move gradually toward a flexible framework to target the inflation more directly.

The recent introduction of more exchange rate flexibility will support such a transition while also helping to maintain competitiveness, it says.

"The government's financial sector reform agenda is on track. Further reforms include putting in place a deposit insurance system, establishing a regulatory framework for private sector pensions, and deepening capital markets, which will facilitate private investment," the Deputy Managing Director and Acting Chair has stated.

Sri Lanka has seen a remarkable progress in the country's economy after the government wiped out the separatist Tamil Tiger rebel group, LTTE, in May 2009 and ended the three-decade long armed conflict.

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