Lanka successful in meeting growth targets -IMF

Sanjeevi Jayasuriya

Sri Lankan authorities have been successful in meeting the guidelines laid out by the International Monetary Fund (IMF) in reaching the growth targets with decrease in inflation, building up reserves, meeting fiscal and debt ratios. However, the relaxed fiscal policy in the early period was back inline with original goals, IMF Resident Representative Dr. Koshy Mathai said announcing the completion of the IMF Stand –By Agreement programme.

“The SBA is relatively successful and will now move to new kinds of arrangements, while giving the government space to explore other avenues of assistance where manifestation of peace dividend could be seen at present,” he said. The pressure on current account deficit was met by firm economic policy changes which paid off and the flexible adjustments stands the economy in good stead, he said.

“We see a future of sustainable economy for Sri Lanka. The consolidation will take place where the policy adjustments will come in to effect. We are having discussions on future IMF programmes where short term assistance is given where necessary,” he said.

The currency movement is not only affected by trade volume but capital movement as well.

We have seen this pressure in Sri Lanka, but projection on the rupee movement is very difficult which will largely depend on how sustainable the capital in flows are and by looking at the underline macro policy and stability.

There are models to measure overvaluation of a currency. It is difficulty to say whether it is over- valued or not.

We have affirmation for a flexible policy framework from the authorities on the rupee valuation. There is a policy framework to see the level of rupee as the market is going to be developed over time to progress naturally.

The measures taken by authorities have a role to prevent market manipulation and speculation is not a bad thing. However, it is important to have right exchange rate levels by removing restrictions for more flexibility, Mathia said.

The executive board of the IMF completed the eight and final review of Sri Lanka’s economic performance under a programme supported by a Stand- By Agreement (SBA).

The completion of the review enables the immediate disbursement of an amount equivalent to SDR 275.6 million (US $ 415 million) bringing total disbursements under the arrangement to US $ 2.5 billion.

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