IMF report gives misleading picture - Central Bank

A senior Central Bank official in Sri Lanka defended the authority's policies yesterday, arguing that the International Monetary Fund had given a misleading picture of the country's inflation.

In a report at the weekend, the IMF said loose fiscal and monetary policies were contributing to Sri Lanka's inflation and rising prices could not be entirely blamed on external factors such as the rising import costs of food and oil. But Nandalal Weerasinghe, director of the economic research department at the Central Bank, said the IMF paper had used outdated figures and was misleading.

"We don't agree with this. They have not incorporated our comments," he said. Weerasinghe pointed to core inflation of less than 10 per cent to show that policies were working. This core measures of inflation strips out energy and food prices.

"We have maintained very tight monetary policy with high policy rates. The credit demand from the private sector has declined to around 15 per cent in early this year from 24-26 per cent in the second half last year," he said.

The Central Bank has held its key policy rates steady for more than a year. The overnight repurchase rate is at 10.5 perc ent and the reverse repurchase rate is at 12 per cent.