Mar 04, 2009 (LBO) – Sri Lanka is among low income countries (LICs) at “medium” risk from global economic turmoil, and some nations were at “high” risk needing foreign aid as commercial markets dry up, the International Monetary Fund (IMF) has said. Direct financial transmission of the crisis was spreading to countries like Ghana and Sri Lanka who have begun to access international capital markets, the IMF said in a report titled The Implications of the Global Financial Crisis for Low-Income Countries.
Lesotho, Pakistan and Sri Lanka were also facing lower access to trade finance and costs were also rising.
“LICs are experiencing outflows of capital, and there are initial pressures on foreign exchange markets and the yield curve,” the IMF said.
“The financial crisis is also sharply reducing private sector credit, in part reflecting a need to increase liquidity buffers given expected cuts in external credit lines.”
IMF said private banks were facing the risk of not being able to roll-over foreign borrowings and even micro-finance firms were being hit.