Fundamentally we are very optimistic about Sri Lanka, says IMF’s Resident Representative Koshy Mathai.
The IMF’s Resident Representative dismissed the popular assertion that the economy was overheated. “On a traditional assessment this could appear so but we haven’t seen high inflation, property or labour prices. With regard to credit-fuelled imports certainly the risk was evident. But the economy isn’t overheated,” the IMF Resident Rep opined.
“However in recent months and weeks the Government and the Central Bank have taken numerous decisive steps to address the Balance of Payments issues. I would say these are positive steps in the right direction so that high growth levels experienced during the past two years could be sustained over the medium to long-term,” he added.
Mathai noted that though there is room for an emerging market to have high current account deficit it was important to pursue a prudent policy mix especially taking in to account both global and local shocks.
The IMF on April 2nd completed its seventh review on Sri Lanka's economic performance under the US$ 2.6 billion Stand-By Agreement (SBA) and approved the immediate disbursement of an amount equivalent to US$ 426.8 million.
Following the Executive Board's discussion on Sri Lanka, Mr. Min Zhu, Deputy Managing Director and Acting Chair, said that while Sri Lanka's strong economic recovery continued last year and inflation remained low in single digit levels, a combination of rapid credit growth and a tightly managed exchange rate caused the external current account deficit to widen and external reserves to fall sharply.
As a result of higher oil prices, the state energy enterprises also continued to run significant losses, the Deputy Managing Director noted.