Sri Lanka should keep monetary policy on hold: IMF

May 02, 2013 (LBO) – Sri Lanka should keep monetary policy on hold for the moment to build on economic stability based on low inflation, an International Monetary Fund official said.

The balance of payments situation was also correcting, though lower imports had put pressure on state finances.

But there had been no dramatic reversals and fiscal policy continued on a tighter path.

The recent tariff increases in power would also help reduce losses in state enterprises which would help release more resources from banks for private sector activity he said.

Update II “We would stay on hold now,” IMF resident Koshy Mathai told reporters in Colombo after an annual Article IV consultation report was submitted to its board.

He said the Central Bank has kept inflation at single digits for a long time, but “building on that success was very important” because the ultimate goal was to improve beyond single digit inflation.

Low inflation allows people to engage in economic activities in a stable environment.

Sri Lanka’s inflation fell to 6.4 percent in the 12 months to April from 7.5 percent in March.

Sri Lanka’s central bank is following a type o