IMF praises govt’s fiscal policies

Sanjeevi Jayasuriya

The International Monetary Fund (IMF) commended the policies taken by the government to address the imbalances in the economy. “The economic future is bright and the policies will be beneficial in the long run. The economy should grow by around 6.75 percent this year as tighter macroeconomic policies work to ease demand to a more sustainable pace. However, the uncertain global environment poses a down-side risk, IMF Mission Head John Nelmes said.

The Central Bank has estimated the growth figure at 7.2 percent. The IMF has predicted that inflation will be around 9.5 percent, but core inflation would remain lower. These projections are the highest in the post war period, he said addressing the media on Friday in Colombo.

The IMF delegation who was assigned to wrap up the eight and final review of the Stand By Agreement was upbeat of the country’s economic progress and lauded tough policy changes implemented in February that included ending Central Bank currency intervention.

“Inflation is likely to rise to upper single digits and we thus need to keep monetary policy focused on inflation pressures. While the transition has caused difficulty in many segments of society, we share the authorities’ assessment that the new policy framework will strengthen the fundamentals of the economy that lay the basis for sustained economic growth,” he said.

The IMF team will return to Washington where the IMF Executive Board will meet on 20 July to decide on the release of the final tranche. Data for June targets have not been made available to the team, but they have been assured targets will be met.

“The authorities are successfully implementing a bold package of policy measures to curb the current account deficit and safeguard reserves and these measures are yielding fruit,” Nelmes said.