Sri Lanka loosened monetary policy without damage: IMF

HANOI, Mar 23, 2010 (LBO) – Sri Lanka was among the countries that ran counter-cyclical monetary policy in 2009 without damaging fallouts but low income Asian nations have to invest more, International Monetary Fund officials said. Sri Lanka is estimated to have grown by about 3.5 percent in 2009 recovering from a slump from the first part of the year.

A global slump is estimated to have cut global growth by 1.0 percent in 2009 but many developing countries were posting positive growth. IMF expects emerging Asia to grow by 8.5 percent this year led by India and China.

Counter Cyclical

Among developed nations, Australia – which has already raised interest rates several times and has a hawkish central bank which largely prevented a big bubble from developing in the first place – is posting the strongest growth expected at 2.7 percent.

“Countercyclical macro-economic policy played a role in supporting activity,” IMF’s managing director John Lipsky told a forum on the performance of developing Asia after the crisis.

“Some countries such as – Cambodia, Sri Lanka and Vietnam – loosened monetary policy.”

Sri Lanka tightened monetary policy from 2007 as inflation rocketed amid loose fiscal policy