Sri Lanka to get US$2.5bn IMF loan

July 21, 2009 (LBO) – Sri Lanka will get 313 million US dollars on July 24 as part of a 2.5 billion US dollar stand by loan running for 20 months, International Monetary Fund managing director Dominique Strauss-Kahn said. Under the program Sri Lanka was expected to improve its budgets, that had high deficits financed with flighty capital that landed the country in trouble.

“Persistently high budget deficits have forced the government to rely on short-term financing from international markets,” IMF managing director Dominique Strauss-Kahn said in a statement.

“The global financial shock resulted in a sudden stop to this financing, capital outflows, and a significant loss of Sri Lanka’s international reserves.

“Despite recent capital inflows, international reserves remain at low levels.”

Sri Lanka’s reserves hemorrhage stopped after authorities ended a period of peg defence in March 2009 allowing the economy to adjust to the money printed during the period of intervention when reserves fell from 3.5 billion US dollars to 1.2 billion dollars.

Since then foreign reserves have zoomed to top 1.7 billion US dollars this week, but budgets remain weak with revenues falling 8.0 percent in absolute term