Sri Lankan authorities have decided not to pursue a new programme with the IMF, but to continue maintaining the close relationship with the Fund under standard consultation processes similar to many other member countries the Central Bank said today in a press release.
A statement by the Central Bank said that the Sri Lankan authorities had expressed their interest in a future IMF program only if a such program entailed support to finance the budget within the announced fiscal consolidation process by which the government has already committed to bring down the fiscal deficit to 5.8 percent of the GDP in 2013 and below 5 percent of the GDP in the medium term.
However, during consultations, the IMF indicated that it may not be in a position to consider any direct or indirect budget support to Sri Lanka, since the current improved status of Sri Lanka does not warrant unconventional and exceptional financial support to the government of Sri Lanka from the IMF.
The IMF has also been of the view that Sri Lanka has now developed well-established access to international capital markets and therefore budget support, if necessary, could be conveniently accessed from such market sources and hence there is no need to access the IMF for such budget financing.
As a result the Sri Lankan authorities have decided not to pursue a new program with the IMF, but to continue maintaining the close relationship with it under standard consultation processes similar to many other member countries, the central bank said.
The central bank said that Sri Lanka’s external reserves have now reached a level of approximately $7 billion, from just over $1 billion in early 2009 when Sri Lanka commenced the Stand-By Arrangement with the IMF and there appears to be a very limited need to build up a further cushion in external reserves.