The International Monetary Fund (IMF) on Monday completed the sixth review of Sri Lanka's economic performance under a program supported by a Stand-By Arrangement (SBA) and approved disbursement of an amount equivalent to about US$ 218.3 million loan.
The completion of the review enables the immediate disbursement of an amount equivalent to about US$ 218.3 million, bringing total disbursements under the arrangement to an amount equivalent to about US$ 1.75 billion, the IMF said in a statement.
The Executive Board also approved a waiver of applicability for the three end-March performance criterions on (i) the net international reserve target (ii) reserve money and (iii) net domestic financing of the central government. A rephasing of the remaining disbursements was also approved by the Board.
The SBA was approved on July 24, 2009 for an amount equivalent to about US$ 2.62 billion, or 400 percent of Sri Lanka's quota.
Following the Executive Board's discussion on Sri Lanka, Mr. John Lipsky, Deputy Managing Director and Acting Chair, stated:
“The Sri Lankan economy continues to make progress under the Fund-supported program and overall macroeconomic developments remain favorable. Growth is strong, inflation remains in single digits, and reserves are at a comfortable level. Recent heavy rains and flooding will significantly damage the various crops, as well as rural infrastructure. However, given the size and strength of the economy, the overall impact on output growth is expected to be limited.
“The 2010 budget deficit target has been met and budget developments so far in 2011 are broadly in line with expectations. The authorities’ plan to handle the flood-related expenses by reallocating and reprioritizing expenditure within the existing budget will help maintain the program’s deficit target for 2011.
“Reforming the two state energy enterprises and bringing their combined operating balance to zero this year would ensure the durability of fiscal adjustment. To this end, it will be important to allow adjustment of domestic prices to reflect fluctuations in international fuel prices.