Early receipt of IMF Board approval will be growth-positive in 2023: CB Chief

Thursday, 26 January 2023 02:22 - - {{hitsCtrl.values.hits}}

By Charumini de Silva

Central Bank Governor Dr. Nandalal Weerasinghe

Early receipt of International Monetary Fund Board approval could result in positive growth this year, Central Bank Governor Dr. Nandalal Weerasinghe said yesterday.

“It is difficult to predict an actual growth rate given the uncertainties prevailing,” he said at the post-Monetary Policy Review meeting media briefing yesterday.

“However, if Sri Lanka can unlock the IMF approval within the first quarter, the situation could reflect positively on the economic growth,” Dr. Weerasinghe said.

The IMF, in the World Economic Outlook report late last year noted that Sri Lanka is expected to see its real GDP contract by 3% in 2023. The World Bank in its outlook projected Sri Lanka’s real GDP to fall by 9.2% in 2022 and a further 4.2% in 2023.

As per the projections, the economy was expected to dip by around 7% to 8% in 2022 and growth is not likely to be witnessed until the second half of 2023.

Sri Lanka was originally expecting an IMF program to be in place by December and new funds to flow in from January 2023, but the IMF Board approval has been tardy due to delays in getting assurances from bilateral creditors on the debt restructuring process. Last week, India gave its assurances to support Sri Lanka’s debt restructuring process.

The Governor emphasised that IMF Executive Board approval for the $ 2.9 billion Extended Fund Facility program and related developments will help ease the crisis in the Balance of Payments after which interest rates will come down.

He expressed confidence that the economy is expected to make a gradual recovery during the year supported by the expected improvements in domestic supply conditions, underpinned by the timely implementation of corrective policy measures.

“The anticipated improvements in foreign exchange inflows and the resultant enhancement in business and investor sentiment are expected to reinforce the expected recovery in the period ahead,” Dr. Weerasinghe said.

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