Sri Lanka no longer a poor country, discussions with IMF constructive: CB Governor

Feb 26, 2016 (LBO) – Sri Lanka is no longer a poor country, and must rely on markets for its funding needs, Central Bank Governor Arjuna Mahendran said. An endorsement of the IMF, in this regard, would be valuable, he added.

“We have had very constructive discussions with the IMF,” Mahendran said.

“The government and Finance Minister gave their frank assessment of the economy and the problems they had inherited. And we are now hammering out a way forward in terms of ensuring the economy grows, inflation is contained, and we pay off some of the large debts accumulated over the last 10 years.”

An IMF official in Washington said earlier this month an agreement on balance of payments support could be worked out in March or early April.

From his perspective, Mahendran said it is important to have an agreement with the IMF on the way forward, more for the endorsement value of the premier institution on the government’s programme.

“We are no longer a poor country. We are no longer eligible for a povery reduction and growth facility like we used to get. Now we are a lower middle income country, and therefore we have to depend on the markets.”

“We are able to raise all our requirements for the government from the local market. We issue bonds in rupees and dollars without having to depend on aid agencies and such like.”

“Now we are trying to get the IMF to agree with us on our policies, so that we can project to wider investors that we are really adopting the best standards in charting an economic course forward,” he added.

Both the government and the IMF is in agreement that fiscal consolidation is a priority. Countries such as Yemen and Georgia have turned around poor revenue collection in a few years, and there was no reason why Sri Lanka cannot do the same, Mahendran said.