An IMF Review Mission headed by Dr. Brian Aitken concluded the fourth review under a US$ 2.6 billion Standby Facility Programme yesterday and Dr. Aitken said the mission was happy with the progress made by the government in containing the fiscal deficit.
"Sri Lanka’s performance was good and we will report favourably to the IMF Executive Committee and if they do decide to release the fourth tranche, we would have released around US$ 1.2 billion under the standby facility. The tranche could be expected late September or early October. So far, disbursements amounted to US$ 1 billion," he said speaking to journalists in Colombo.
"According to the solid numbers made to available to us, the government’s fiscal performance up to June showed that it was consistent with its commitment to reaching a deficit target of 8 percent of GDP by the year end," Dr. Aitken said.
Under the IMF standby facility programme, and the government’s own budgeted target, Sri Lanka was supposed to reach a deficit of 7 percent of GDP in 2009 but it ballooned to 9.9 percent instead and this resulted in the IMF delaying the third tranche until the government showed it was committed to bringing down the high deficit.
Earlier, this year, the IMF approved the tranche after the government released the mini budget for 2010 which showed a deficit of 8 percent of GDP.
As reported in The Island Financial Review yesterday, the fiscal deficit for the first six months of the year had reached 3.95 percent of GDP or Rs. 215.3 billion, a 15.46 decline from Rs. 254.7 billion for the same period in 2009, which was 5.27 of GDP.
Dr. Aitken said the economy was picking up but in order to reach growth rates of more than eight percent, investments into long term projects would have to improve.
"There is a lot of positive sentiment and foreign investors are looking at the prospects in Sri Lanka, but we have not yet seen such projects materialise. In a sense there seems to be gestation period. Given Sri Lanka’s turbulent macroeconomic past, investors are probably waiting to see if Sri Lanka could sustain the macroeconomic stability it is now seeing. Also, long term projects take time, so we will have to see how the months ahead unfold," Dr. Aitken said.
He went on to say that investment grew sluggishly or at historical levels Sri Lanka would not be able to realise its true growth potential.
source - www.island.lk
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