IMF endorses economy on right track - CB Governor

“We know that we are on the right track. Nevertheless, it is always good to have an international agency like the IMF confirming independently that Sri Lanka’s economy is robust and in good shape,” Central Bank Governor Ajith Nivard Cabraal said, commenting on IMF’s release of the two tranches under Sri Lanka Stand-by Arrangement (SBA) facility.
“Such pronouncements are useful particularly because there are still a few mischievous local elements whose only function seems to be to mislead everyone that Sri Lanka’s economy is not in good shape. Therefore, an occasional endorsement from an outside independent agency helps to expose these elements too. The steps that we have taken and the sound levels at which our macro-economic fundamentals are today positioned are plain for everyone to see. Therefore, anyone could see that Sri Lanka is on the correct economic path and in that regard, the IMF loan has certainly helped us,” he pointed out.
The second and third reviews of the SBA have been successfully completed by the International Monetary Fund (IMF) and two tranches to the value of SDR 275.6 million (approximately US dollars 407.8 million) have been disbursed by the IMF on 28 June 2010.
With this disbursement, a total of US dollars 1,060 million has now been received by Sri Lanka on account of the SBA facility that was approved in July 2009. In addition to the above, Sri Lanka also received a further sum of US dollars 508 million in August 2009 in relation to the general and special allocations of SDR by the IMF. Accordingly, a sum of US dollars 1,568 million has so far been received from the IMF which helped raise country’s reserves to a very comfortable level.
“As you know, in the aftermath of the massive global economic turmoil, many countries faced very difficult situations in their external sectors, and we too had to take steps to safeguard ourselves from these vulnerabilities. With the several steps that we have taken and the support received from the IMF, we have now comfortably overcome the impact of the crisis and are well on the way to a significant growth and a new momentum in our economy.”
Central Bank has an International Operations Department where the investment decisions of the country’s reserves are made with care and professionalism. The new funds that we received from the IMF would constitute a part of such reserves and we would apply the same prudent and professional judgment in investing in time to come, as well, he asserted”.
According to the Central Bank, the IMF SBA serves not merely as a monetary support for the external sector, but even more as a confidence boosting arrangement when facing the outside world. Speaking about tax reforms he said, “Everyone including the government know very well that it is important for us to reduce our fiscal deficit on a planned basis. At the same time, however, in the short-term, we have to complete some of the mega projects that we are already engaged in, so that those can start generating new economic results. That is why the government has estimated a somewhat wide 8 per cent fiscal deficit this year. But, yet it has committed itself to a gradually reducing deficit percentage in the years to come. We are confident that with the improvements that would be made in the tax administration and tax structure, and the substantial growth that is envisaged in the next few years, the tax collections would reach acceptable and reasonable levels, thereby reducing the burden on the Government to borrow. In this regard, what is salutary is the fact that these are be implemented without compromising the various safety nets that are prevalent in our country, to support the needy and that is an important consideration.

(CW)