IMF Mission Head lauds bold policy measures

Sri Lanka has successfully implemented bold policy measures to curb current account deficit and safeguard reserves and these measures are yielding fruit said International Monetary Fund Mission Head John Nelmes.

He said that credit growth has slowed and imports have declined and added on long term the IMF is positive about the macro-economic growth stability and the economic potential of Sri Lanka.

"Sri Lanka's economic will growth by around 6.75 percent this yearn and inflation may rise to 9.5 percent by year end, needing monetary policy to be kept tight, for the time being" Nelmes said.

"The uncertain global economy environment posses a downside risk, but the rupee depreciation should provide a boost to the economy" he said.

Nelmes said that though Sri Lanka had taken bold measures to fix balance of payments pressure policy has to be kept tight until firm evidence of inflationary pressures easing is seen. "Given the new policy framework in particular the pursuance of exchange rate flexibility as well as continued strength in remittances and success in attracting capital inflows, international reserves at the Central Bank have stabilised" the Mission Chief said.

IMF growth of 6.75 percent is slightly lower than the 7.2 percent forecast by the Central Bank. Nelmes said growth is weakening due to tighter domestic conditions as well as weaker external demand.

The IMF is completing the review and is expecting to go to the board on July 20 which will see a 450 million dollar last tranche coming. Discussions were also underway for a follow up program.