Sri Lanka needs international donor support for next two years to meet post-tsunami costs, IMF

Sri Lanka will be forced to depend on international support for the next two years, as a US$ 1.8 bn post-tsunami reconstruction bill puts a strain on balance of payments and the budget, the IMF said late Friday. Sri Lanka will be forced to depend on international support for the next two years, as a US$ 1.8 bn post-tsunami reconstruction bill puts a strain on balance of payments and the budget, the IMF said late Friday. The country’s economy is expected to remain flat at 5¼ percent in 2005, but much of the growth will be offset by reconstruction efforts, the International Monetary Fund noted while approving a US$ 157.5 mn in emergency loan for Sri Lanka.

The world’s financial police, also deferred US$ 110 mn as interest payments due in 2005 by one year.

The IMF expects Sri Lanka’s budget gap to widen to 9.6 percent of GDP in 2005 from a pre-tsunami deficit target of 7.5 percent. The forecast deficit is wider than last year’s 8.2 percent.

The Fund says Sri Lanka may miss its budget deficit target because of “higher current and capital outlays and a marginal adverse impact on revenues.”

“The rehabilitation expenditure will put a great strain on the balance of payment and the budget. The emerg