Sri Lanka sta­bi­liz­ing af­ter bailout: IMF

Kuwait Times - - BUSINESS -

Sri Lanka’s econ­omy has be­gun to sta­bi­lize af­ter se­cur­ing a $1.5 bil­lion bailout ear­lier this year, but the is­land needs to build its dwin­dling for­eign re­serves, the IMF said yes­ter­day.

The Wash­ing­ton-based In­ter­na­tional Mone­tary Fund said it had just con­cluded its first re­view of Sri Lanka’s econ­omy af­ter an­nounc­ing the bailout in June and la­belled its per­for­mance “broadly sat­is­fac­tory.” Cash-strapped Sri Lanka se­cured IMF help in June af­ter suf­fer­ing a bal­ance of pay­ments cri­sis ear­lier this year.

“Sri Lanka’s per­for­mance un­der the Fund-sup­ported pro­gram has been broadly sat­is­fac­tory de­spite chal­leng­ing cir­cum­stances,” IMF’s Act­ing Chair and Deputy Man­ag­ing Di­rec­tor, Tao Zhang, said in a state­ment. He said the IMF on Fri­day re­leased $162.6 mil­lion to Sri Lanka as the sec­ond tranche of its bailout that will be dis­bursed over three years.

Sri Lanka’s macroe­co­nomic and fi­nan­cial con­di­tions had be­gun to sta­bi­lize, in­fla­tion has trended down, and the bal­ance of pay­ments had im­proved, he said. How­ever, he cau­tioned Sri Lanka’s in­ter­na­tional re­serves re­mained be­low com­fort­able lev­els and also warned of credit ex­pan­sion that could fuel fur­ther in­fla­tion.

Of­fi­cial fig­ures show the cur­rent re­serves of Sri Lanka at $6.06 bil­lion, suf­fi­cient to fi­nance im­ports for nearly four month. In line with IMF pre­scrip­tions, the gov­ern­ment raised value added tax from 11 per­cent to 15 per­cent this month and also an­nounced an in­crease in cor­po­rate taxes to boost rev­enue.

The gov­ern­ment also lifted a ban on for­eign­ers own­ing prop­erty as the coun­try sought to at­tract for­eign cap­i­tal to re­build its war-rav­aged econ­omy. The gov­ern­ment is tar­get­ing a bud­get deficit of 4.6 per­cent of GDP next year, down from 5.4 per­cent of GDP this year, with for­eign bor­row­ings of $3.1 bil­lion and $1.2 bil­lion in do­mes­tic loans help­ing to bridge the gap. — AFP

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