Sri Lanka has cut deficit spending, lowered inflation: monetary minister

Sept 25, 2011 (LBO) – Sri Lanka has reigned in deficit spending, allowing inflation and interest rates to ease, giving space for people to engage in growth generating activities after the end of a long running war, a senior minister has said. “Relatively high fiscal deficits and double digit inflation were the main macro-economic issues resulting in high levels of public debt, high interest rates and unstable currency…,” Sarath Amunugama, minister for International Monetary Co-operation said.

Amunugama was speaking in Washington at the annual meetings of the International Monetary Fund and World Bank. He is Sri Lanka’s governor for the Fund.

“Prudent monetary and credible fiscal policies that were implemented by my government has helped bring down inflation to a manageable level, and has maintained single digit inflation since 2009,” he said.

“The fiscal consolidation process has steadily brought down fiscal deficits, from 10 percent of GDP (gross domestic product) to below 7.0 percent in 2011.

“Our medium term macro-economic program targets further fiscal consolidation aiming at bringing down the debt to GDP ratio below 60 percent by 2016.”

Deficit spending by Sri Lanka’s rulers has been identified by analysts as