Sri Lanka has successfully achieved all the key objectives under the Stand-by Arrangement (SBA) facility from the International Monetary Fund (IMF), the Central Bank said.
According to the Central Bank, the key objectives of the SBA programme, which was approved by the global lender in July 2009, were to rebuild the external reserves, strengthen the fiscal position, maintain monetary stability and fortify the domestic financial system.
With the SBA facility, Sri Lanka has built up international reserves to a comfortable level equivalent to 3.5 months of imports while containing the budget deficit and maintaining inflation at single digit levels and the stability of the financial system.
"In this regard, the Sri Lankan authorities value the contribution made by the IMF towards the progress of the Sri Lankan economy since 2009 under the SBA programme," the Central Bank said in a statement.
Upon completion of the eighth and final review of the SBA facility Friday, the IMF immediately disbursed the final tranche of about US$415 million to Sri Lanka.
With the release of the ninth tranche, Sri Lanka has received a total of approximately US$ 2.548 billion under the SBA facility.
The SBA facility is the longest engagement Sri Lanka has had with the IMF and the single largest facility Sri Lanka has ever obtained from a multilateral institution.
Approving the last installment following the Executive Board's discussion on Sri Lanka, Deputy Managing Director and Acting Chair Naoyuki Shinohara has praised Sri Lanka's efforts to achieve financial stability and the substantial macroeconomic policy adjustments undertaken to stabilize international reserves.
The IMF official suggested Sri Lanka to continue macroeconomic stabilization and structural reforms efforts, in particular maintaining exchange rate flexibility while building international reserves.
Earlier this year Sri Lanka implemented several policies to arrest the ballooning trade deficit which has risen to US$ 10 billion in 2011 and to build country's reserves.
The government raised import taxes on vehicles and fuel prices to save reserves while the Central Bank upped the policy interest rates to limit credit growth and allowed the currency to depreciate.
The global lender has agreed that Sri Lanka's current monetary policy stance is appropriate, and stressed that "monetary conditions should remain firm in the near term given high headline inflation and possible second-round effects."
The Central Bank said the Sri Lankan authorities now look forward to the continued close engagement with the IMF and intend to discuss the possibility of financial support for its economic development agenda under an Extended Fund Facility (EFF).