Lanka has advanced on economic front - Nelmes
“Sri Lanka has accomplished remarkable advancement on a number of
economic fronts over the past few years: growth has been vigorous,
inflation has declined from high double digits, fiscal and external
consolidation is underway and the Standby Arrangement was successfully
completed,” John Nelmes, IMF Head of Mission to Sri Lanka said at the
conclusion of its staff mission’s visit.
IMF Head of
Mission to Sri Lanka, John Nelmes, at the discussion.
A staff mission led by John Nelmes visited Colombo between January 30
to February 13 and conducted discussions for the Article IV
consultation, which is the IMF’s regular exchange of economic views with
each of its member countries and to discuss possible financial support
for Sri Lanka’s economic reform agenda.
Real GDP growth is projected to amplify to around 6.25 percent in
2013 and the revival will likely be constrained by the need to continue
fiscal consolidation; high inflation, which limits the room for
near-term monetary easing and a continued slow recovery in Sri Lanka’s
main trading partners, mainly the US and EU. The mission had agreed with
the authorities that lowering inflation to mid-single digits would
strengthen macroeconomic steadiness in future. Therefore, along with
structural reforms to improve efficiency and competitiveness would
support healthy growth over the medium term.
The mission had welcomed the authority’s obligation for continued
fiscal consolidation, given the public debt levels remaining elevated.
The budget deficit was kept close to the target of 6.25 percent of
GDP through outflow restraint and delays in cash payments. The plan to
diminish the deficit to 5.75 percent of GDP this year is appropriate.
However, tax revenues have now fallen to below 11.5 percent of GDP,
among the lowest in the region and which reflects the decreasing
activity, declining imports and exemptions and issues with tax
The mission and the authorities also explored a potential IMF
programme, designed to build on Sri Lanka’s achievements under the SBA.