Sri Lanka comes under IMF microscope

Mar 03, 2009 (LBO) – The International Monetary Fund has sent a mission to Sri Lanka to look at the country’s “near-term outlook”, the global monetary watchdog said, as the island is grappling with the worst balance of payments crisis in a decade. The binges brought minor currency crises in 2004, 2006 and 2007 as well as high inflation touching or exceeding 20 percent a year.

In 2008 monetary policy was tight until it started to unravel in September with peg the defence exercise, which is now draining reserves.

Sri Lanka’s official reserves have fallen to 1.7 billion US dollars in December from 3.4 billion US dollars in September. In January a further 251 million dollars was spent on peg defence.

Fitch Rating said that there was “an increasing likelihood that international financial support may be necessary.”

The central bank has said it has got 200 million dollars from Malaysia and was chasing currency swaps with two other central banks.

Monetary Watchdog

The IMF said the March mission was an “interim staff visit” ahead of the annual Article IV consultation and was in line with the practice in IMF-member countries in Asia.

The IMF was created by the architects of the Bretton Woods agreement of ‘soft-peg