IMFs outlook on SL positive - Dr. Koshy Mathai

By Sureka GALAGODA

The IMF has a very positive view of Sri Lanka, said Resident Representative Sri Lanka and Maldives International Monetary Fund (IMF) Dr. Koshy Mathai.

Addressing the 10th Insurance Congress themed ‘Sri Lanka Gateway for Asian Insurance Markets’ Dr. Mathai said that the IMF is keen to see what is in the budget and now the private sector can make a higher contribution.

Dr Koshy Mathai    Pic: Kavindra Perera

The Government is trying to eliminate the complicated and ad hoc tax system and move to a simpler tax regime, solve issues in land acquisition as well as permits and introduce reforms in the areas of loss making state ventures. Dr. Mathai said that this is a tall order for the Government.

The IMF is happy with what the Government is doing.

The IMF does not recommend the tightening of the monetary policy for Sri Lanka as it is on the right track. It is not overheating, credit is growing but at manageable levels. The budget expenditure should be tightened and this is a structural problem.

He said that there are many ways of reducing the budget deficit which includes printing of money, borrowing money from the domestic market or borrowing internationally. All three options have their repercussions.

The projections for 2010 were better than the international projections. All this was done while not cutting capital expenditure, which is very easy to do. Instead the Government economized on other sources and this has helped to reduce the Budget deficit.

He said that Sri Lanka attracts one tenth of Foreign Direct Investments (FDI) attracted by Vietnam and the reasons are the war as well as the ones mentioned above.

Dr. Mathai said that Sri Lanka is undergoing a structural shift and if correct policies are implemented the country can achieve a higher growth.

For this year the IMF is predicting a growth of 5 percent due to the contraction last year.

He said that the emerging economies contribute the largest amount to the growth while the developed economies’ contribution is low as unemployment is high while construction activity has not rebounded.

Countries in Europe have tightened their fiscal policies after the crisis .

India is growing at 10 percent and the growth in China is also close to 10 percent.

In developing economies rather than relying on fiscal stimulus the private sector has stepped up which is helping these economies to record higher growth.