Political leadership in agreement to get IMF programme back on track
CB Governor says recent rating downgrades unwarranted; says even IMF advised Moody’s to wait for SC verdict before any rating action
Says rating agencies have been influenced too much by headlines in media, which tend to sensationalise things
Admits that rating downgrades will make future borrowings more expensive.
The political leaders representing the major political parties in the country are in agreement to get the International Monetary Fund (IMF) programme back on track as soon as possible to stabilise the economy, amid external financial conditions increasingly becoming unfavourable for the island nation, according to Central Bank Governor Dr. Indrajit Coomaraswamy.
“Right across the political spectrum, there is a commitment to the macroeconomic framework, which we have to stick to, given our debt and deficit dynamics as there’s a little room to manoeuvre. That massage has been seemed to absorb by whole of the political spectrum.
Across the political spectrum, there’s a consensus to stick to overall budget deficit targets of 5.3 percent GDP this year and primary balance surplus of 0.7 percent.
Not only there’s a commitment to the macroeconomic framework but also right across the political spectrum, there’s a recognition that we need to get the IMF programme back on track as soon as possible,” he said.
Dr. Coomaraswamy made these remarks delivering the keynote speech at the 54th Annual Report Awards organised by the Institute of Chartered Accountants of Sri Lanka, Tuesday evening, in Colombo.
The IMF has put on hold the final phase of the three-year loan programme with the country plunging into political crisis when President Maithripala Sirisena appointed former president Mahinda Rajapaksa as prime minister sacking Ranil Wickramasinghe on October 26.
However, the Central Bank had said that earlier on the same day (October 26), the IMF had reached a staff-level agreement in principle on the fifth review of the Extended Fund Facility, which was to be announced in the following week.
Following the political crisis, the three major credit rating agencies— Moody’s, Fitch and S&P— have downgraded Sri Lanka’s sovereign rating.
However, Dr. Coomaraswamy called the rating downgrades “hasty, superficial and unwarranted”, while noting that even the IMF had advised Moody’s to wait until the Supreme Court verdict on the dissolution of Parliament.
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