Kelum Bandara
The International Monetary Fund (IMF) has postponed the review of the country’s economic situation till December before releasing the ninth tranche of the US$ 2.9 billion stand-by facility which was scheduled to have been released in August, officials said yesterday.
But informed sources said the IMF had withheld the tranche because of the dismal performance by state institutions and the government’s failure to properly manage the exchange rate.
Responding to such speculation, Central Bank Governor Ajith Nivard Cabraal said the economy was on a sound footing, and it was the government which had asked for such a postponement so that the overall performance of the macro economy could be reviewed.“We preferred the economic situation to be evaluated in its entirety rather than doing it on a piecemeal manner,” he said and added that the Central Bank’s foreign reserves had risen to an all-time high of US $ 8.1 billion, and therefore the IMF tranche was not essential at this time.
“Our economy has improved. We can sustain it with or without the IMF tranche. It is not a must at the moment,” he said.
Senior Minister (Finance) Sarath Amunugama also said there was no such postponement in this regard.
“The government only asked for a spacing of the review,” he said.
A delegation led by Dr. Amunugama was to leave for Washington last evening to attend the International Monetary Fund (IMF) and the World Bank summits. The delegation comprises Central Bank officials. The IMF had invited United National Party (UNP) MP Ravi Karunanayake to attend this meeting. However, he said he could not participate in it because he was occupied with political duties in view of the upcoming local council elections.
The IMF approved this stand-by facility in July, 2009, on a request by the Sri Lankan government to resuscitate its economy in the post war period. The previous tranche was released in April, this year, and four more tranches were due. The reduction of the budget deficit, the curtailment of the state expenses and the containing of the cost of living and the management of the exchange rate were some of the conditions put forward by the IMF in this regard.