Sri Lanka among Asian countries struggling with capital inflows: IMF official

Feb 26, 2011 (LBO) – Sri Lanka is among Asian nations struggling with capital inflows driven by excessive money printed in advanced nations, raising the risks of high inflation and asset booms, a senior International Monetary Fund official said. “Sri Lanka is one country that has faced a surge in capital flows,” IMF deputy managing director, Naoyuki Shinohara, told a forum of Asian central bankers in Colombo.

Sri Lanka faced a balance of payments crisis in late 2008, but it then floated the currency and came out of the crisis in April 2009.

An IMF bailout a month later also helped restored the credibility of the peg with the US dollar, drawing inflows allowing the central bank to buy large volumes of forex to re-build reserves.

“On the other hand, intervention has led to excess rupee liquidity and attendant risks of a credit boom and high inflation, and the central bank, like many of its counterparts in the region, is grappling with how to manage these issues,” Shinohara said.

He was addressing central bank chiefs at the South East Asian Central Banks (SEACEN) which received a shot in the arm this year with the entry of China.

In addition to Sri Lanka, Brunei, Cambodia, Fiji, Indonesia, Korea, Malaysia, Mongolia, Myanm