Sri Lanka IMF deal fine print will increase confidence: analysts

July 22, 2009 (LBO) – An International Monetary Fund loan will beef up Sri Lanka’s external solvency but it will raise investor confidence further once details spelling out an economic plan agreed with the lender are published, analysts said. In 2004 a growth oriented IMF backed structural adjustment program was abandoned half way and budget deficits, money printing and inflation went up.

Investors are waiting till July 24, when the loan is to be approved by IMF’s executive board and a letter of intent and a technical memorandum is made public to gauge the exact fiscal and monetary plan of the government.

The IMF has so far not published the 2008 report on the country after its annual ‘Article IV’ consultations.

Muttukrishna Sarvanandan, a Colombo-based economist, said recently the report was being suppressed at the request of Sri Lankan authorities.

Sri Lanka hit a balance of payments crisis just as a short statement based on the report came out urging authorities to abandon a dollar peg, which was overvalued due to high inflation created in the recent past. Sri Lanka is due to get a 2.5 billion US dollar stand by loan from the IMF Friday boosting foreign reserves by 313 million US dollars with the first tranche.