Government has decided not to pursue a fresh support facility form the International Monetary Fund but will continue to maintain the close relationship with the lender under standard consultation processes similar to many other member countries.
The Central Bank of Sri Lanka in a statement released today said since the completion of the 2.6 billion dollar Stand-by-arrangement in July 2012, Sri Lankan authorities and the IMF have been engaging in a dialogue on the future relationship between Sri Lanka and the Fund.
The Central Bank noted, Since Sri Lanka is in a better economic position now with gross reserves amounting to 7 billion dollars than with the 1 billion dollars of reserves it had when the SBA was approved in July 2009, there is very little need for the government to build up a further cushion in external reserves through traditional IMF Balance of Payment support programs.
Under these circumstances, Sri Lankan authorities had expressed their interest only in a future IMF support to finance the budget to achieve government target of 5.8 percent of GDP fiscal deficit in 2013 and below 5 percent in years ahead.
However, following discussion Sri Lankan authorities had with the visiting IMF delegation, the IMF has indicated that the Fund may not be in a position to consider any direct or indirect budget support to Sri Lanka, since the current improved state of the country does not warrant unconventional and exceptional financial support.
According to the Central Bank, the IMF is also of the view that Sri Lanka has now developed well-established access to international capital markets and therefore budget support if necessary, could be conveniently accessed from such markets.
Deputy Director of the Central Bank of Sri Lanka Prof. Nandalal Weerasinghe gave the following explanation as to why Sri Lanka refrained from taking part in the International Monetary Fund's new loan program.
The IMF had stated that Sri Lanka's financial base had stabilized and that funds cannot be provided to bridge the budget deficit.
Deputy Director of the Central Bank of Sri Lanka had the following to say in this regard.