Tough Choices

The IMF plans to work on a macroeconomic impact, budgetary and balance of payments needs assessment to the tsunami-hit Sri Lanka, besides stepping in with up to US$ 160 mn in emergency financial assistance, a senior International Monetary Fund official said on Wednesday. The IMF plans to work on a macroeconomic impact, budgetary and balance of payments needs assessment to the tsunami-hit Sri Lanka, besides stepping in with up to US$ 160 mn in emergency financial assistance, a senior International Monetary Fund official said on Wednesday. Anne O Kruegar, first deputy managing director noted that the Sri Lankan economy has taken the biggest beating alongside Maldives following the Dec. 26 tsunami.

The Fund on Tue., shaved off a percentage of Sri Lanka’s 2005 economic growth to four percent, while inflation was forecasted to go shoot up to 14 percent, from an earlier 12 percent.

The country report warned that the “broader macro-economic impact will clearly be substantial.”

The tsunami also left Sri Lanka with a US$ 1.8 bn reconstruction bill, which works out to about 6.5 percent of GDP.

Much of the reconstruction costs will come in from foreign donors, either through new loans/grants or by rescheduling debt repayments – like the Paris Club’s one year de