Sri Lanka still confident on completion of IMF staff review by next month

Sri Lanka is still confident on the completion of International Monetary Fund’s (IMF) staff review and the executive board approval to be completed by October – November as the government is fully committed to implement economic reforms along with debt restructuring process, Central Bank (CB) Governor Nandalal Weerasinghe said.

Answering a question raised by a journalist at the Central Bank monetary policy review media briefing in Colombo today he noted that India, Paris Club and China debt restructturing negotiations are continuing with “very impressive progress”.

IMF staff level agreement will also be reached soon following the settlement of ‘few matters’ including the achievement of some targets as soon as possible, he said.

The Central Bank is optimistic in stablising inflation around 5 per cent in the near future under inflation targeting, in accordance with the new CB Act, Governor Weerasinghe said.

“Under the new Central Bank Act, we have a commitment now agreed with the government to maintain inflation at 5 per cent% over a medium to long-term period,” he added.

He pointed out that the current inflation rate of 1.3 per cent is below the range that the CB is expecting to maintain in the medium to long-term.

He said, “this we all understand, the reasons are mainly 12 months ago we had almost 70 per cent inflation and came down sharply in the disinflation process that continued for the last several months”.

The disinflation process has almost neared and that now inflation has stabilised reaching a lowest point of 1.3 per cent last month, he explained. 

“The Central Bank expects that trend to turnaround and settle over a period of time around the target range between 4-6 per cent and around 5 per cent medium.” he said.

“Inflation target is 5 per cent, plus or minus 2 per cent. Variation would be assessed on the basis of quarterly average of two quarters. If there is a deviation it will trigger other actions,” Dr. Weerasinghe said adding that they will announce the agreement reached with the government shortly.

Under the new flexible inflation targeting regulation, the Central Bank has to sign an agreement with the government to maintain inflation at a specific level. (Bandula)