IMF tells Sri Lanka to rebuild reserves, be ready to tighten
Posted on March 7th, 2017
By Shihar Aneez Courtesy Nasdaq
COLOMBO, March 7 (Reuters) – The International Monetary Fund urged Sri Lanka’s central bank on Tuesday to rebuild foreign reserves while maintaining exchange rate flexibility and to be ready to tighten monetary policy if credit growth or inflation do not abate.
Following its second review of a $1.5 billion three-year loan programme, the IMF said it had discussed with Sri Lankan authorities the need to push forward with reforms due to an uncertain external environment.
Generally, the IMF delays disbursements if countries drastically deviate from targets, but the IMF did not say whether it would hold back the third tranche of $119.9 million, due on April 20.
“To this end, it is important for the government to continue on the revenue based fiscal consolidation and generate adequate resources to support its social and development objectives while maintaining debt sustainability,” the IMF said in a statement.
Deputy Central Bank Chief Nandalal Weerasinghe said though the end-2016 foreign reserve target was missed, authorities are working on end-June 2017 goals.
“The central bank has already allowed flexible exchange rate from early this year,” he told Reuters.
On Jan. 3, central bank Governor Indrajith Coomaraswamy said defending the rupee with foreign exchange reserves “doesn’t seem sensible” as it has always been followed by a sharp depreciation in the currency. Finance Minister Ravi Karunanayake said the government authorities had a “successful meeting” with the IMF.
The IMF warned that a more prolonged drought could raise food and oil imports, and have an adverse impact on growth, inflation, and the balance of payments.
Sri Lanka’s worst drought in 40 years may cost up to $264.7 million, but should not worsen the fiscal deficit, the finance minister said last week. The central bank is struggling to maintain a flexible exchange rate in the face of heavy foreign outflows from government securities. The rupee has depreciated 1 percent so far this year, having lost 3.9 percent of its value against the dollar last year.
The central bank tightened monetary policy three times in seven months through July last year to curb high credit growth and inflation. But those moves have dragged on the economy.
March 8th, 2017 at 4:51 pm
As the FIRST STEP in the IMF-mandated AMUDEY tightening that is looming, the tightening should BEGIN AT THE TOP!
– All Ministers, MP’s, Provkncoal Councillors and assorted political doodads should GIVE UP their recent Salary Increases and Rs 100,000 bonuses!
– All Ministers, MP’s, Provincial Chief Ministers and other assorted political hangers-on should return their recently received LUXURY SUVS to the state. These should be AUCTIONED off and the proceeds deposited in the national treasury.
– All Public Empoyees who received a Rs 10,000 per month Salary increase under the Yamapalanaya election promise should give up that salary increase!
– Arjuna Mahendran, his relative Aloysius, Ranil Wikunanasinghe, and other assorted GREAT CENTRAL BANK LOOTERS should be compelled by LAW to RETURN the LOOT IMMEDIATELY to the National Treasury.
– The Coal Tender Scam Money should be recoveted and returned to the treasury.
– The taxes on the vehicles coming off the Volkswagen Factor assembly ly line should be increased forthwith!
– The DMV registration fees on luxury vehicles should be increased by a factor of 1000, to be paid retroactively to Jan 8, 2015!
– The case that was pending against Ravi Karunanayake for financial skulduggery should be adjudicated, severe penalties imposed and the recovered money deposited in the treasury.
….. ad infinitum!
…… ad nauseam!
The amudey-tightening dictats of the IMF should be resolved on the backs of the FAT CATS in Sri Lankan society who made hay under the Yamapalanaya and not by increasing the burden on the poor and destitute now condemned to dine on CROTON and JAK leaves!
March 8th, 2017 at 7:07 pm
Agree with Ananda !
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Add: PATRIOTISM, Self Respect & Self Sufficiency (as far as is possible) needed !
March 9th, 2017 at 11:31 am
Also IMF must returned the monies that are deposited in banks worldwide especially US and Switzerland by ex and late leaders of the third world. They seem to prop up their currencies and wealth with this type of illegal money from the third world.