The International Monetary Fund (IMF) on Friday said it was encouraged by Sri Lanka's monetary and exchange rate policy changes amid a sharp drop in foreign exchange reserves and significant widening of the current account deficit.
"There was broad agreement that a decisive policy response was needed to put the economy on a sounder macroeconomic footing, especially given the current uncertain global environment," Brian Aitken, head of the IMF review team, said in a statement at the conclusion of a review of Sri Lanka's progress under a $2.6 billion loan.
"We are encouraged by the recent adjustment in the monetary and exchange rate policy stance as well as the strong commitment of the government to reduce the budget deficit to 6.2 percent of GDP in 2012."
The central bank earlier in the day raised policy rates for the first time in nearly five years in the face of a looming balance-of-payments crisis and rampant credit growth, aiming to cut the trade and current account deficits and ease the need to intervene in the foreign exchange market. (Source: Reuters)