Sri Lanka decides not to pursue new IMF funding programme
Sri Lankan authorities have decided not to pursue a new programme
with the IMF, but continue maintaining the close relationship with the
Fund under standard consultation processes similar to many other member
countries, states the Central Bank.
Sri Lanka has moved to a more market oriented exchange rate
determination regime and the country's reserves have increased to a much
higher level when compared to the position at the beginning of the
Stand-By Arrangement. In fact, Sri Lanka's external reserves have now
reached a level of approximately US$ 7 billion, from just over US$ 1
billion in early 2009 when Sri Lanka commenced the Stand-By Arrangement
with the IMF, the Bank further said.
Accordingly, there appears to be a very limited need to build up a
further cushion in external reserves through traditional IMF Balance of
Payment support programmes, such as Stand-By Arrangements and Extended
Fund Facilities.
In that background, the Sri Lankan authorities had expressed their
interest in a future IMF programme, only if such programme entailed
support to finance the budget within the announced fiscal consolidation
process by which the Government has already committed to bring down the
fiscal deficit to 5.8 per cent of GDP in 2013 and below 5 per cent of
GDP in the medium term. However, during consultations, the IMF has
indicated that the Fund may not be in a position to consider any direct
or indirect budget support to Sri Lanka, since the current improved
status of Sri Lanka does not warrant unconventional and exceptional
financial support to the Government of Sri Lanka from the IMF.
The IMF has also been of the view that Sri Lanka has now developed
well-established access to international capital markets and therefore
budget support, if necessary, could be conveniently accessed from such
market sources and hence there is no need to access the Fund for such
budget financing. (www.priu.govt.lk)
|