Economy guided by new monetary and fiscal policies:

IMF disburses final tranche of $ 415 m

In a resounding endorsement of Sri Lanka’s burgeoning economy, the International Monetary Fund yesterday decided to disburse US$ 415 million to the country as the final tranche of a US$ 2.6 billion facility.

The economy has been guided on a more sustainable footing by the present administration through new monetary and fiscal policies, the IMF said in a statement.

The IMF also recommended new financial support for Sri Lanka.

“It will be important to continue macro-economic stabilisation and structural reforms efforts, in particular maintaining the exchange rate flexibility while building international reserves,” IMF Deputy Managing Director Naoyuki Shinohara said.

“A successor arrangement with the Fund would provide valuable support to the authorities in these endeavours.”

Sri Lanka’s IMF resident representative Koshy Mathai told a seminar in Colombo on Thursday that the right policies have been implemented and the fundamentals of the economy have been set on a more sustainable footing.

He was speaking on the eve of the IMF directors’ meeting in Washington DC that discussed the approval of the final tranche. He said the new policy measures had minimised unforeseen future shocks to the economy.

“Good times are here - in the sense that we can see a future of more sustainable growth, more sustainable progress for the country without any fear that there are going to be problems cropping up underneath.”

“We now have an economy that is underpinned by good policy fundamentals, we now have the commitment by the Central Bank and the Government to run [economic] policies in a flexible way,” Mathai said.

“These are all shock absorbers for the economy. And when we are hit by shocks from the outside world...especially at these uncertain global times, it’s useful to have policy flexibility so that we can respond.”

Central Bank Governor Ajith Nivard Cabraal told the media on Friday that Sri Lanka had met all economic targets needed for the IMF facility including net domestic financing, net internal reserves and reserve money targets.

An IMF mission that visited Sri Lanka in June said that Sri Lanka’s policy measures including policy rate hikes, flexible exchange rate and credit restrictions have had a positive impact on the economy.

Economic analysts said the IMF tranche will boost the Government’s accelerated development drive in all areas of the country.

Meanwhile, in a further sign of investor confidence in the Sri Lankan economy, a 10-year USS 1 billion Sri Lanka sovereign bond attracted orders of $ 10.5 billion from 425 investors last week, with US investors buying 44 percent of the issue.