The IMF urged Sri Lanka's central bank on Friday to avoid continuous sales of foreign exchange and allow a flexible exchange rate to ease pressure on balance of payments.

Completing the seventh review of its $2.6 billion loan to the island, the International Monetary Fund said Sri Lanka's macro economic performance was satisfactory.

"Strong export growth and continued large remittance inflows have supported reserves. But going forward, rapid import growth and high oil prices could put pressure on the balance of payments," the IMF said in a statement.

"In this event, the central bank should allow the exchange rate to reflect market forces ... and avoid sustained sales of foreign exchange, ensuring that reserves remain healthy and the economy competitive." (Reuters)