IMF faults govt. for limping on reforms; warns of heavy cost of inaction

By Chandeepa Wettasinghe
The International Monetary Fund (IMF) this week displayed mixed sentiments over the Sri Lankan government, in the backdrop of providing a US $ 1.5 billion three-year extended 
fund facility.

IMF Sri Lanka Mission Chief Todd Schneider expressed disappointment over policymakers, while praising the bureaucracy.

“The cost of inaction is relatively high. Sri Lanka needs to do a major reboot of macroeconomic policies. There has been, it’s fair to say, policy drift now for some time with regards to macroeconomic policies and the lack of clarity as to where things are going,” he said. He noted that inactive fiscal consolidation, the snail’s pace of state enterprise reform, inflexible exchange rates and not providing clarity to foreign and domestic investors could cost Sri Lanka dearly.

“Uncertainty with respect to course of macroeconomic policies that everyone has in mind is very negative to investment and growth. The cost for inaction at this very point is actually quite high,” Schneider said. Finance Minister Ravi Karunanayake last week defeated a no confidence motion 
that was brought against him by the opposition.

When inquired if the recent dents to the reliability of the Central Bank, and its Governor Arjuna Mahendran were of concern, Schneider said that he had confidence in the officials that the IMF had been having close relationships with.

“I was remarking to my colleagues the other day that we actually managed to negotiate a programme in a relatively short period of time, and that has a lot to say of the hard work and the expertise at the Central Bank and Ministry of Finance and the revenue generation institutions,” he said.