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Friday, February 26, 2010 - 04.57 GMT |
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Sri Lanka’s
overall economic conditions improving - IMF |
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“Overall
economic
conditions
are
improving
as
expected,
and the
economy
is
poised
for a
recovery
this
year.
External
balances
are
strong,
remittance
inflows
continue
at a
high
rate,
tourism
prospects
are
rapidly
improving,
and
gross
reserves
remain
at
comfortable
levels”,
stated
the
International
Monetary
Fund
(IMF) in
its
press
release
at the
conclusion
of the
IMF
staff
mission
to Sri
Lanka.
For
end-December,
the
government
has met
the
targets
agreed
under
the
program
for net
international
reserves
and
reserve
money,
it
further
stated.
IMF also
stated
that
despite
higher
borrowing,
as well
as a
recent
uptick
in
year-on-year
headline
inflation,
they
continue
to
assess
the
central
bank’s
monetary
policy
stance
as
appropriate.
“Overall,
we
expect
average
inflation
for the
year as
a whole
to
stabilize
in the
high
single
digits”,
it
added.
Following
is the
full
text of
the IMF
statement
at the
Conclusion
of an
IMF
Staff
Mission
to Sri
Lanka on
25 Feb,
2010
The
International
Monetary
Fund
(IMF)
office
in
Colombo
issued
the
following
statement
today at
the
conclusion
of a
10-day
visit by
a staff
team
from IMF
headquarters:
“An IMF
mission
led by
Brian
Aitken
visited
Colombo
during
February
16-25 to
hold
discussions
on
performance
and
policies
under
the $2.6
billion
Stand-By
Arrangement,
approved
by the
Board on
July 24,
2009.
The
mission
met with
officials
from the
Central
Bank,
the
Ministry
of
Finance
&
Planning,
the
Presidential
Tax
Commission,
and
other
government
ministries
and
departments,
as well
as
representatives
of civil
society
and the
private
sector.
“Overall
economic
conditions
are
improving
as
expected,
and the
economy
is
poised
for a
recovery
this
year.
External
balances
are
strong,
remittance
inflows
continue
at a
high
rate,
tourism
prospects
are
rapidly
improving,
and
gross
reserves
remain
at
comfortable
levels.
“For
end-December,
the
government
has met
the
targets
agreed
under
the
program
for net
international
reserves
and
reserve
money.
Final
data for
the
overall
budget
balance
are not
yet
available,
but the
ceiling
on
domestic
budget
borrowing—consistent
with the
government’s
overall
deficit
target
of 7
percent
of
GDP—was
exceeded
by a
substantial
amount.
This
mainly
reflects
faster-than-expected
infrastructure
project
implementation,
higher
interest
payments,
and
sluggish
fourth-quarter
revenue
growth.
We are
currently
assessing
the
implications
of this
outturn
for
bringing
the
underlying
budget
deficit
to a
sustainable
level.
“Despite
this
higher
borrowing,
as well
as a
recent
uptick
in
year-on-year
headline
inflation,
we
continue
to
assess
the
central
bank’s
monetary
policy
stance
as
appropriate.
With
bank
lending
only
slowly
beginning
to
rebound,
and
economic
growth
remaining
below
its
potential,
we see
little
sign of
emerging
demand-driven
inflationary
pressures.
The
central
bank has
acted
appropriately
through
its
monetary
operations
by not
allowing
higher
budget
spending
to be
financed
through
the
creation
of
additional
liquidity.
The
upward
trend in
inflation
in
recent
months—reflecting
the
temporary
effects
of
increases
in food
and
other
international
commodity
prices
from low
levels
in
2009—is
in line
with our
expectations
and
should
peak
somewhere
mid-year
before
reversing
itself
in the
second
half of
2010.
This
phenomenon
is not
unique
to Sri
Lanka
and is
currently
taking
place in
many
other
counties
as well.
Overall,
we
expect
average
inflation
for the
year as
a whole
to
stabilize
in the
high
single
digits.
“We
remain
engaged
in a
constructive
dialogue
with the
government,
with the
aim of
agreeing
on
policies
to
support
staff’s
recommendation
to IMF
Management
and the
IMF’s
Executive
Board
for the
completion
of the
second
review
of the
Stand-By
Arrangement.
The next
step in
this
process
would
entail
an IMF
staff
visit to
Colombo,
following
parliamentary
elections
and the
formation
of the
new
cabinet,
to
discuss
with the
government
its
plans
for a
full-year
2010
budget,
including
tax
reform
measures.”
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