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The IMF has warned that high inflation would burn up the benefits of the large amounts of aid being pledged for Sri Lanka’s post tsunami reconstruction. A top executive of the Fund says the government will have to space out reconstruction, as the economy may not be able to absorb large amounts of aid without causing macro economic imbalances like high inflation.
The Fund says it will help Sri Lanka set up a reasonable macro economic framework for next year to avoid bad effects of high inflation.
The International Monetary Fund, which postponed debt repayments worth US$ 114 million due this year, says it will help the government put together a macro economic framework for this year to help reconstruction without fuelling inflation.
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"The risk is that with these resources available people might say 'Ok we will go and fix everything.' The local resources will simply won't be available that fast. There will be an effort on our part and cooperation of the authorities to take a look at what would be a re