IMF says Lanka’s economy navigated turbulence

Sri Lanka’s economy has navigated recent market turbulence relatively well. Growth has remained solid, inflation is in mid-single digits, and the current account deficit has narrowed, the International Monitory Fund (IMF) said in a statement. From mid-May, the exchange rate came under pressure as market expectations of US Federal Reserve tapering shifted, but Sri Lanka’s experience was in line with that of other emerging markets. Since September, market pressures have eased. By some metrics, reserves remain on the low side, but were boosted in late-September by an external debt issue of a large state-owned bank. The IMF said that monetary policy has eased progressively since end-2012 as growth slowed, inflation fell, and private sector credit weakened. At the time of an IMF mission visit to Sri Lanka, the staff had recommended keeping monetary policy on hold for the near term. However, policy rates were subsequently reduced, with the central bank citing continued low inflation and the opportunity to stimulate growth to a higher level in 2014. IMF also noted that the authorities remain committed to fiscal consolidation and intend to meet their 2013 deficit target. However, the steady real decline in government revenue collection poses risks to needed medium-term fiscal consolidation, according to colombogazette.com