Sri Lanka looking at IMF program option: CB Governor
ECONOMYNEXT – A program with the International Monetary is one option that Sri Lanka is looking at but there was a lot of interest from bi-lateral partners to finance the country, Central Bank Governor Arjuna Mahendran said.
"It is an option we are looking at," Mahendran said responding to a question whether Sri Lanka will strike a deal with the lender after the budget is presented in parliament in November.
"There is a lot of bilateral interest in funding the country, Japan in particular. They are saying they want to come back in a big way because they lost out to China in the last 5-years.
"So if those guys come with significant numbers we won’t need the IMF."
Asian Development Bank has also said they want to double funding to Sri Lanka from the current 450 million US dollar levels over next two years if the government had suitable project and it would also consider a quick budget support loan if there was a strong reform program.
Sri Lanka’s state finances has come under strain from a sharp rise is public sector wages and subsidies in 2015. The gap which was financed by domestic borrowings and central bank credit has hit the balance of payments and foreign reserves.
Sri Lanka lost about the third of its foreign reserves in the year to August and has borrowed 1.5 billion US dollars from the Reserve Bank of India to shore up its stock.
The Central Bank has already allowed the rupee to fall from around 132 to 141 to the US dollars to kill demand by cutting real incomes and savings so that living standards would be lowered and less money will be left to consume imported goods.
A fall in the currency raises the prices of imported and exported goods imposing a bout of inflation. A real increase in the dollars has pushed down the commodity prices reducing price levels in the traded goods sector.
IMF mission Chief to Sri Lanka, Todd Schneider said no firm plans can be made until after the budget.
"We discussed the possibility of closer engagement going forward," IMF mission chief to Sri Lanka Todd Schneider said on September 18.
"And it is the budget that forces that discussion to take concrete shape." (Colombo/Sept30/2015)