Sri Lanka revised IMF deal focuses on budget

Sept 27, 2010 (LBO) – A revised program Sri Lanka has signed with the International Monetary Fund is allowing more monetary space for the central bank with responsible fiscal policy continuing to be the key focus. A revised letter of intent given by the government has made a deposit insurance scheme for banks, reducing tax holidays for firms and reforming value added taxes in the next budget, structural benchmarks.

The government has also said it will introduce a plan to regulate private pension funds through the Insurance Board of Sri Lanka and restructure debt of the Ceylon Electricity Board and the Ceylon Petroleum Corporation by the end of December 2010.

The letter said a plan to sort out the debt has already been devised.

The structural benchmarks are an important component of an IMF program, but the deal is more strongly bound by performance criteria, which have to be met to keep the program on track.

The revised program has almost the same targets as the last revision. The program sets a reserve money target of 349 billion rupees for end September and 360 billion rupees for end December, in line with previously released data.

Central Bank data shows that reserve money hit 348 bill