IMF review mission says SL on track

* Welcomes fiscal reforms
* Notes inflation’s rise on food prices

A review mission from the International Monetary Fund (IMF) says the government has made significant progress toward fiscal and external stability while challenges remain going ahead, and that all end-September targets under the US$ 2.6 billion standby facility programme have been met. It noted that inflation had risen mainly on food prices while the trade deficit was widening. The review mission, already back in Washington after spending last week in Sri Lanka, will now relay their findings to the executive board of the IMF.

It welcomed the reforms announced in the Budget 2011, but said further progress would be required to ensure growth was accelerated and the economy was transformed. The IMF review mission believes the economy would grow by 7.5 percent this year and that the budget deficit would be contained at 8 percent of GDP as planned in the original budget for 2010.

The IMF suspended the programme for a few months earlier this year after the government failed to meet a deficit target of 7 percent of GDP for 2009, reaching 9.9 percent instead. It recommenced the programme after it was satisfied that the government was committed to fiscal reforms in the 2010 budget.

Sri Lanka’s economy has always struggled to maintain macroeconomic stability, but since the conflict ended, the country has experienced a degree of stability not seen before. However, despite the conflict, fiscal indiscipline has been another cause for concern, and has been called the ‘bane of macroeconomic stability’ and the Central Bank earlier this year warned the government against reckless spending.

But the government has realised that it has to contain high deficits. Accordingly, it plans to bring the budget deficit down to around 5.2 percent of GDP by 2013.

See Article ‘Sri Lanka on Track...’for full text of the IMF review mission’s statement.


source - www.island.lk