Sri Lanka hoping to resume IMF program: Central Bank

Mar 01, 2012 (LBO) – Sri Lanka is planning to resume a deal with the International Monetary Fund which can boost the island’s forex reserves which had fallen to 5.7 billion US dollars and there is no capital flight, the Central Bank said. Analysts say that in the absence of a clean float and higher interest rates to curb bank credit growth the rupee can become a ‘crawling peg’.

There has been a net inflow of 216 million US dollars into government securities from foreign investors from February 09 when the rupee was partially floated, and corrective steps were taken to reign in credit growth which put pressure on a dollar peg, the Central Bank said.

According to Central Bank data foreign investors held 212 billion rupees of bonds up from 199 billion rupees on January 04. Treasury bills holdings rose to 84.5 billion rupees from 70.1 billion rupees in the same period there amid periodic changes.

The International Monetary Fund held back the last 800 million dollar tranche under a stand by arrangement reached in May 2009, at the end of the island’s previous balance of payment crisis.

“Meanwhile, the IMF-SBA (stand by arrangement) programme is progressing with plans of completing the 7th review towards the end of March 2012,