The extension of the program with the International Monetary Fund (IMF) for another year is good for the country not because of the quantum of money that comes with it, but as a move that will help restore confidence on the economy among foreign investors, economists and financial analysts said.
“Extending the program is important not only because it will help the country to increase foreign reserves but also to rebuild confidence that was lost partly due to political issues,” Senior Lecturer Faculty of Economics, University of Colombo, Prof. Sirimal Abeyratne told the Sunday Observer.
However, economists and financial analysts noted that the country cannot remain complacent having extended the program with the international donor but needs to do much more to be self reliant and develop the economy with medium to long term plans.
“For the past 50 years Sri Lanka has received assistance 15 times from the IMF which means that the country does not take issues of the economy seriously.
If we fail to address macro-economic issues we will continue to depend on foreign assistance for the next 50 years,” Prof. Abeyratne said, adding that the country needs to get over the vicious cycle and stand on its feet.
The IMF reached a staff level agreement on the fifth review and to extend the Extended Fund Facility (EFF) for another year with the remaining disbursements evenly spread to allow more time for economic reform.
The international donor temporarily suspended the $1.5 billion EFF program with Sri Lanka, which also included the release of the penultimate tranche. The three-year program is due to conclude in June.
Subject to the submission of the 2019 Budget being consistent with the EFF-supported program, the Board is expected to consider Sri Lanka’s request for completion of the fifth review in May this year. The authorities are taking steps to complete all the pending actions and structural benchmarks for this review over the next few weeks,” she had said in a statement.
Real GDP growth is expected to improve to about 3.5 percent this year, from 3 percent in 2018.
Inflation recovered in January and is projected to reach 4.5 percent in 2019.
The current account deficit widened to 3.2 percent of GDP in 2018, on the back of higher fuel prices, lower agricultural exports, and a surge in imports of vehicles, but is expected to narrow this year benefiting from the correction in the exchange rate.