Govt’s recent policy decisions in right direction - IMF

Sanjeevi JAYASURIYA

The International Monetary Fund (IMF) is optimistic of the economic growth of Sri Lanka and said that the recent policy decisions were taken in the right direction.

IMF Sri Lanka Representative Dr. Koshy Mathai Picture by Sumanachandra Ariyawansa

“The economy is not over heated. It is pressured by commodity prices and labour market demands. The concentration should be on qualitative side to ensure sustainable economic development,” IMF Sri Lanka Representative Dr. Koshy Mathai said.

“The policy implementation has taken shift from one policy to a combination of policies. It will take time to see the real change and we are happy regarding the flexible policies,” he said at a media briefing held at the Central Bank yesterday.

“The policy changes are seen as responsiveness in line to macro economic fundamentals. This is the time that sustainability of the economy moving forward is witnessed. The underline of economic policies will boost the growth. The monetary policy tightening is to stabilize the exchange rate.

“The second half of last year was a concern. However, decisive and positive steps were taken at the beginning of this year. The policies were directed at growth sustainability covering the entire country. The tax structure adjustment shows total commitment to address the Balance of Payment issues. The policies in the recent past are highly consistent in addressing the BPO issues,” he said.

Responding to a question on the slow FDI flow, Dr. Mathai said that domestic investment leads to foreign investment and it takes time to get use to the new business environment. The country experienced a steady increase over the years, he said adding that addressing the BOP issue and the consolidation of the policy regime are among the immediate concerns.

“The rise in the economic growthresulted in current account deficit where mobilization of capital flows from abroad was attracted to finance the deficit. However sustainable corrective actions have been taken at present.

“Fundamentally IMF’s involvement is to discuss policies to steer the whole economy in the right direction. The lowering of the growth projection and other fiscal instruments are heading in the right direction,” he said. The IMF Executive Board met on Monday and completed the seventh review on the US $ 427 million of a total US $ 2.6 billion Stand- by Agreement.

The disbursement will be available next week where it accounts for total of $ 2.13 billion. The Board approved an extension of the arrangement period to July to allow time for the completion of the eight and final review.