Washington DC (BBN)- The International Monetary Fund (IMF) has suggested the Sir Lankan authorities to formulate monetary policy statement (MPS) with maintaining a balance between supporting growth and containing inflation.
“Monetary policy needs to maintain a balance between supporting growth and containing inflation,” the IMF said in a statement on Thursday, adding that a continued forward-looking approach is needed given long lags in monetary transmission.
The IMF also sees the country’s macroeconomic performance has generally exceeded expectations.
Real gross domestic product (GDP) grew 7.3 per cent for 2013, up from 6.3 per cent in 2012. Inflation declined to below 5 per cent, and the external current account balance has improved.
“Private credit growth has been slow, however, a number of financial sector indicators have deteriorated,” it noted.
Fiscal consolidation and debt reduction need to continue, but the burden of adjustment needs to shift decisively to revenue generation. “Debt targets could potentially be recast to achieve deeper reduction over a longer period.”
It also said financial sector consolidation could lead to economies of scale, greater resilience, and more effective supervision, but corporate governance needs to continue to improve, and careful supervision in the post-consolidation period will be key.
“Maintaining competitiveness and achieving a more sustainable external position will require a mix of continued innovation, sustained investment in infrastructure and human capital, a predictable business environment, and ideally a heavier emphasis on direct investment and equity portfolio flows than debt,” the IMF noted.
BBN/SSR/AD-19Sept14-12:05 pm (BST)