The International Monetary Fund ( IMF) has approved a loan of 415 million U.S. dollars to Sri Lanka as part of an agreement reached in 2009, the Sri Lankan Central Bank announced Saturday. The bank said that under the agreement, a total of approximately 2.49 billion U.S. dollars had been disbursed to Sri Lanka in stages since 2009. The decision to release the final tranche was made by the IMF Executive Board on Friday and the funds were accordingly transferred to the Central Bank in Sri Lanka.|
"The completion of the agreement marks the longest engagement Sri Lanka has had with the IMF and the single largest facility Sri Lanka has ever obtained from a multilateral institution. The program is to rebuild the external reserves, strengthen the fiscal position, maintain monetary stability and fortify the domestic financial system,"the Central Bank said.
The bank said that the Sri Lankan authorities now look forward to the continued close engagement with the IMF and intend to discuss the possibility of financial support for its economic development agenda under an Extended Fund Facility (EFF). On Friday, IMF Deputy Managing Director and Acting Chair Naoyuki Shinohara said that following robust growth in the first quarter of 2012 in Sri Lanka, activity has started moderating in response to policy tightening and weakening global demand. "The current monetary policy stance is appropriate, and monetary conditions should remain firm in the near term given high headline inflation and possible second-round effects.
With a flexible exchange rate regime, monetary policy can increasingly focus on inflation control to achieve broader macroeconomic stability while allowing the exchange rate to act as a buffer for external shocks. Foreign exchange market intervention should thus be limited to smoothing excessive volatility, and steps should be taken to gradually deepen the foreign exchange market,"the IMF said. The IMF noted that Sri Lankan authorities are committed to meeting their 2012 deficit target by restraining expenditure, but it added that a redoubling of effort to strengthen revenue administration is needed..
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