IMF commends Lanka’s efforts to advance fiscal consolidation | Sunday Observer

IMF commends Lanka’s efforts to advance fiscal consolidation

Manuela Goretti
Manuela Goretti

The Sri Lankan authorities have made progress to bring the Extended Fund Facility (EFF) program, under the International Monetary Fund (IMF), on track, despite 2018 being a tough year and IMF commends the measures taken to improve security with a sustained effort by all parties to improve monetary, policy and market stability to achieve higher growth following the terrorist attacks, said IMF Mission Chief for Sri Lanka, Manuela Goretti via a video conference from Washington last week.

Speaking to journalists at the IMF office in Colombo, the Mission Chief commended the efforts by Sri Lanka to advance fiscal consolidation through the well-targeted 2019 Budget.

She also commended efforts to rebuild reserves while maintaining a prudent monetary policy under greater exchange rate flexibility.

“Inflation remains anchored with prudent monetary policy management by the Central Bank,” Goretti said.

However, with regard to the implications of the recent terrorist attacks on the economy, the Mission declined to comment as it felt it is too early to assess the implication of the attacks on the economy. “It would be speculating to make assumptions at this point of time. However, we will be monitoring the situation in Sri Lanka,” the Mission Chief said while noting that meeting revenue targets will be critical as tourism, a key sector of the economy has been affected by the recent incidents.

However, according to the Mission Chief, the IMF will maintain its growth projection of 3.5 percent for Sri Lanka this year and thereafter, five percent in the medium term.

On the implications of the Easter attacks on other sectors, she said along with tourism, investor and market confidence too has been impacted negatively. The authorities need to stabilise the economy soon.

When queried about Sri Lanka’s refinancing position following the attacks, given the low ratings on the country, the Mission Chief noted that there was no major risk for Sri Lanka in refinancing as the country has successfully financed two large bonds. There is one coming in October next year. Sri Lanka is open to international capital markets.

country, the Mission Chief noted that there was no major risk for Sri Lanka in refinancing as the country has successfully financed two large bonds. There is one coming in October next year. Sri Lanka is open to international capital markets.

The global lender revised down its global growth forecast for 2019 to 3.3 percent from the previous level of 3.5 percent in its latest World Economic Outlook (WEO) as the trade war between the US and China, US sanctions on Iran and political instability across countries continue to weigh in heavily on the global economy.

When asked whether such headwinds would impact Sri Lanka’s growth, the Mission Chief said the slow down in international trade will be a loss for every economy. However, there is no immediate threat to Sri Lanka, in particular, from trade wars. Sri Lanka has already started to liberalise trade to be more competitive in international markets.

On the additional time offered to Sri Lanka, Goretti said an additional year was offered to Sri Lanka to complete the program supported by the IMF which remains broadly the same,” Goretti said. The Executive Board also approved an extension of the arrangement by one additional year, until June 2, 2020, with re-phasing of remaining disbursements.

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