Ravi K says Sri Lanka meets most of 2016-end IMF targets

Tuesday, 7 March 2017 00:36 - - {{hitsCtrl.values.hits}}

Reuters: Sri Lanka has met all targets set by the International Monetary Fund (IMF) for its $ 1.5 billion loan, except the net internal reserves (NIR), Finance Minister Ravi Karunanayake said on Monday.

The global lender had a two-week-long review discussion on the island nation’s present economic and financial situation, ever since it disbursed the second tranche in November.

“Fiscal and revenue targets have been met. Fourteen of 15 structural benchmarks are also met. However, NIR target could not be met due to huge bond outflow,” Karunanayake said.

He said a US-based hedge fund had started the exit process from government securities in 2015, which coincides with the Federal Reserve’s rate hike. This led to many foreign investors, who held local rupee bonds, to leave the market.

Generally, the IMF delays subsequent tranche if the respective member-country is able to drastically deviate from the original target. It was not immediately clear if the IMF would delay the third tranche of $ 119.9 million, which is scheduled for 20 April after the completion of the second review.

The IMF stated on Sunday that Christine Lagarde, the IMF’s Managing Director, would not be visiting Sri Lanka this month as she had been tentatively scheduled to.

One of the main targets of the IMF program was to boost the foreign exchange reserves. The Central Bank had net purchased $ 109.45 million from the market, the official data showed in the second half of 2016.

The Central Bank had expected strong inflows, including from a stake sale of a port to a Chinese firm, but Opposition protests dragged the inflow.

In its first review in November, IMF said it reached a deal with the Government to modify the international reserves target, reflecting changes in capital flows environment.

The original 2016-end NIR target was set on an assumption of outflows from government securities of around $ 450 million in the second-half of last year.

IMF officials were not immediately available for comment.

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