Sri Lanka inflation seen subdued: IMF

Nov 20, 2009 (LBO) - Visiting International Monetary Fund officials said Sri Lanka's inflation is seen staying low with no sign of demand-driven inflationary as the economy and credit are still growing too slowly to generate inflation. IMF mission chief Brian Aitken said economic growth has been better than expected when it approved a 2.6 billion dollar loan in July with confidence improving and foreign investor enthusiasm strong.

But it would be challenging for government to meet its 2009 budget deficit target of seven percent of Gross Domestic Product although it remains within reach, he told a news conference.

He spoke at the end of a 10-day visit by a staff team from IMF headquarters which he headed for talks on the second review of the IMF loan.

Aitken said the IMF board will decide in the first quarter of next year on disbursement of the third tranche of nearly 330 million dollars under the program based on the mission's assessment of government performance.

The IMF said in a statement the government’s economic policies have so far been in line with the programme and that all end-September targets were met.

Garments exports are stronger than expected, import growth is starting to increase and the re