Sri Lanka central bank “deeply distressed” over British FM’s IMF remarks

May 14, 2009 (LBO) – Sri Lanka’s central bank said it was “deeply distressed” over doubts raised by Britain’s foreign minister about the use of money from an expected International Monetary Fund loan.

IMF money goes into the balance sheet of the central bank, which is a separate entity from the finance ministry.

Through the laws covering the central bank, the money supports the external payments of any Sri Lankan entity whether public or private.

Ahead of the loan IMF also started a ‘safeguards assessment’ to check whether Sri Lanka’s central bank had sufficient controls to ensure that loan proceeds would only be used for the purposes intended by the international lender.

Sri Lanka has asked for a 1.9 billion loan from the IMF to boost its reserves. Britain’s foreign minister David Milliband said on May 11 that he did not think that Sri Lanka has yet shown that it would use the IMF loans “in a responsible and appropriate way.”

Sri Lanka’s central bank said the comments were “very unfortunate and disturbing” and it was a “slur on the impeccable debt servicing record” of the institution.

The Central Bank said the IMF had given it nine loans in the past 25 years all the l