Nov 29, 2007 (LBO) – The International Monetary Fund (IMF) has asked Sri Lanka to print less money and have better budgets to prevent balance of payments problems and high inflation, after its annual discussions with the island.
IMF’s executive board assessing Sri Lanka in the annual Article IV consultations with the island said recent “impressive growth” was good, but it was achieved by money printing, which in turn had destabilized the economy and put pressure on the rupee.
“Directors noted that growth has been underpinned in part by expansionary fiscal and monetary policies, leading to an increase in macroeconomic and external sector vulnerabilities,” the IMF said in a public information notice released Thursday.
The international monetary watchdog said inflation has started to increase, the external current account deficit was “large” and official reserves were “relatively low”.
The recent budget had promised a reduction of the budget deficit to 7.7 percent of gross domestic product (GDP).
But IMF said “a sharper fiscal adjustment” of 6.3 percent was needed as promised in an earlier medium-term budget improvement plan. IMF said renewed efforts must be made to cut the budget deficit to 5 percent of GD