INTERNATIONAL MONETARY FUND SAYS THE LOAN IS A DIRECT ENDORSEMENT RECOGNIZING SRI LANKA’S ECONOMIC POLICIES
Posted on July 28th, 2009

By Walter Jayawardhana

International Monetary Fund’s Mission Chief for Sri Lanka in Washington, Brian Aitken accepted the statement of the Sri Lanka Central Bank that the recent approval of USD 2.6 billion is a direct endorsement recognizing the Sri Lanka government’s economic policies by the international lending institution.

 Aitken said in Washington, “the IMF Board would not have endorsed this program if we did not feel like the government has the desire and the capacity to implement it.”

In a telephone conference call interview by the IMF’s own public relations person Ms. Yoshiko Kamata, Aitken further said, “The government’s program is quite ambitious in addressing the problems, the root causes that created the vulnerabilities for the economy. We feel that it’s a strong program. We feel that the government is committed to implementing it, and we also believe that if they do implement it, it would put Sri Lanka on a much stronger basis and lay the basis for much higher growth in the future in addressing the post-conflict reconstruction needs. Now the IMF Board would not have endorsed this program if we did not feel like the government has the desire and the capacity to implement it. The end of the conflict will certainly have a positive impact on Sri Lanka’s growth. We would expect there to be higher foreign direct investment. We would expect there to be an increase in and opening up in a way of areas that were under the conflict in the North. And the government, as they being their reconstruction program there, I think that would lay the infrastructure for much higher growth. So, yes, I think the end of the conflict is good news for the Sri Lankan economy.”

 Aitken was answering the question: “Central Bank of Sri Lanka just now said this is an IMF approval of $2.6 billion and it’s a direct endorsement by the IMF recognizing the government’s economic policies. Is that true?”

 Aitken speaking on an optimistic note about Sri Lanka’s recovery also said, the global recovery that they would expect in both Asia and in the United States and Europe will benefit Sri Lanka, particularly their exports of garments to the U.S. and to Europe which has been Sri Lanka’s main export. They would also expect that it should have a positive impact on remittances to Sri Lanka from Sri Lankan workers overseas, he added.

 He said for government’s economic program it was very important to protect public welfare programs regarding health , education and giving to the poor: “: I should be clear that it’s very important for the government’s program with the IMF support to protect social spending, particularly on health, education and transfers to the poor. We don’t have any specific conditions under the program because that’s not really our specialty or our focus. The government, however, as I understand, plans to increase somewhat social spending on health and education, and I believe that the government is trying to, as they state in their Memorandum of Economic Policies, intends to target some payments, transfers, better so that they can go to the people who need it most. So that is one of the reasons why the government feels that they need to raise revenue under their program.”

 Answering the question how quick would an economic turnaround be for Sri Lanka Aitken said, “What we’re feeling now is that as the global crisis dissipates, Sri Lanka’s growth should rebound, and we’re expecting that to happen next year. In fact, it may already be happening with the end of the conflict.”

He also added, “As you know, the central bank has a growth estimate of 3 percent, which we agree with, but it could be higher than that. It’s really hard to determine at this stage.”

Asked how much additional financing needed for Sri Lanka from other donors and multilateral banks Aitkins said,” At the moment, there’s a fair amount of financing already in the pipeline for project-related loans. The ADB[Asian Development Bank] has money targeted for budget support co-financed by the Japanese. Now how much is needed depends on how ambitious and how quickly the government can move on its reconstruction program. I think their intention is –once they have a much more specific program, their intention is to approach the bilateral-multilateral donors to help finance this program. If the government has the capacity to implement this program quickly, then it will need the support, more support from the donor community.”

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