IMF asks Sri Lanka to pay close attention on economic reforms, amidst high inflation

December 22, 2006 (LBO) – The International Monetary Fund Friday asked Sri Lanka to go slow on hiring public servants and pay more attention to reduce inflation, implement public sector reforms and ensure subsidies are targeted better.

In its annual country report, the IMF said Sri Lanka’s quest for 7-8 percent growth hinges on improved business climate, productivity improvements, rationalizing trade regimes and financial sector reforms.

“However Sri Lanka’s near- and medium-term economic prospects depend critically on progress on the peace front and on implementing essential reforms,” the global financial watchdog warned referring to the long running ethnic conflict that has claimed over 60,000 lives since 1972.

Military confrontations between the government forces and the Tamil Tiger rebels have intensified recently, claiming over 3,500 lives since last December, and progress to settle the conflict through multi-party negotiations remains limited.

“With only minor interruptions in most parts of the country, growth is projected at 7 percent. Financial markets have remained calm, though investor confidence has been somewhat weakened by increased uncertainties,” the Fund said.

The economy, which has expanded at