The Executive Board of the International Monetary Fund (IMF) on Friday approved the disbursement of another $212.5 million installment under the Stand-By Arrangement (SBA), saying it had completed the fourth review of Sri Lanka's economic performance.
The money will be disbursed on Monday, the IMF said in a statement after the meeting. Murilo Portugal, Deputy Managing Director and Acting Chair, said in the statement that Sri Lanka’s performance under the programme has been satisfactory with overall economic conditions improving and the economy likely to show strong growth this year on the back of improved fundamentals and political stability.
“Sustaining high, socially inclusive growth will require substantially higher levels of private investment, underpinned by broad-based structural and financial sector reforms. The current favourable environment allows the authorities to focus on addressing the many challenges that remain, particularly in the fiscal and financial sectors,” he said, adding that policies will be geared toward preserving macroeconomic stability, ensuring external competitiveness, facilitating capital market development, and improving the investment climate.
He pointed out that fundamental tax reform, including reform of the investment promotion regime, is central to achieving the government’s budget deficit reduction targets while creating the fiscal space for much-needed reconstruction and infrastructure investment, as well as social spending. “In this regard, the 2011 budget will be key to demonstrate the government’s continued commitment to the programme’s goals.”
He said further improvements in monetary policy formulation will provide useful support for macroeconomic stability. “The Central Bank is now in a position to move gradually toward a flexible framework that targets inflation more directly. The recent introduction of more exchange rate flexibility will support such a transition while also helping to maintain competitiveness.”