COLOMBO: The IMF on Monday urged Sri Lanka to continue fiscal consolidation and tighten monetary policy and said it had agreed to delay the next review of its 3-year loan until the government submits the 2018 budget. The International Monetary Fund loan is worth $1.5 billion and Sri Lanka has already received around $520 million in three previous instalments. The next review should be completed before for Sri Lanka gets the forth tranche.
Sri Lanka has already passed a new revenue act to boost revenues and curb the budget deficit. “Incorporating the new Inland Revenue Act, the 2018 budget should continue fiscal consolidation supported by stronger revenues,” the IMF said in a statement. “The central bank should stand ready to head off pressures on inflation and credit growth, while continuing to enhance exchange rate flexibility.” The global lender said Sri Lanka had improved its fiscal position and strengthened its international reserves, “but more needs to be done” over state-owned enterprise reforms. “Upholding the reform momentum will be important for addressing fiscal and external imbalances and meeting the government’s ambitious social and development objectives,” it said. Sri Lanka’s four monetary tightening steps since December 2015 have had slowed the growth of private sector credit growth which stood at 18.0 percent in August, down from a near four-year high of 28.5 percent in July 2016.
