IMF “endorsement” for Lanka?

Sri Lanka hopes to continue its relationship with the International Monetary Fund (IMF) to boost foreign investment even after a US$ 2.6 billion Stand-By agreement ends in July, the Central Bank Governor said yesterday.

Despite tenuous interaction in the past, Central Bank Governor Ajith Nivard Cabraal insisted that discussions with the IMF on a long-term “relationship” would take place next month.

Sri Lanka will receive the last tranche of US$ 425 million of the US$ 2.6 billion Stand-By Agreement in July, but it has always been unclear what role it would play afterwards.                              

“We are looking to outline how Sri Lanka can benefit from continued engagement with the IMF, especially due to the uncertain global situation. In a volatile world, endorsement by the IMF could be valuable,” he said.

When questioned by media to explain how such an endorsement would take place, Cabraal remarked that the IMF could assist the Sri Lankan Government to “draw parameters on how the economy should move” and such a “broad agreement on economic management could be endorsed by the IMF”.

Cabraal hopes that such a statement would bolster confidence in foreign investors, which is all the more crucial as the post-war country aims to nearly double its Foreign Direct Investment to US$ 2 billion in 2012.

However, public sentiment of the IMF is largely negative after the Central Bank minimised intervention in the rupee under IMF recommendations, leading to a 16 per cent depreciation from February.