June 15, 2012 (LBO) – Sri Lanka’s economic growth may slow to 6.75 percent in 2012 and inflation may rise to 9.5 percent by year end, requiring monetary policy to be kept tight, for the time being the International Monetary Fund official said. Discussions were also underway for a follow up program.
John Nelmes, head of a mission to Sri Lanka said the government had taken bold measures to fix balance of payments pressure but policy has to be kept tight until firm evidence of inflationary pressures easing is seen.
Growth as 6.75 percent is slightly lower than the 7.2 percent projected by the Central Bank but it is still high in the context of global conditions.
Nelmes said growth is weakening due to tighter domestic conditions as well as weaker external demand.
The IMF is completing the review and is expecting to go to the board on July 20 which will see a 450 million dollar last tranche coming.