COLOMBO, March 15 (Reuters) - Sri Lanka will seek a waiver from the International Monetary Fund (IMF) after failing to meet its 2009 budget deficit target as agreed for a $2.6 billion loan, the central bank said on Monday.
Authorities hope a waiver would allow frozen payments from the loan to resume, K.D. Ranasinghe, the chief economist at the central bank, told Reuters in an interview.
The IMF said late last month that it was delaying the third tranche of the loan after the government missed its 2009 deficit targets. The third tranche is worth around $318 million of the remaining loan of around $2 billion.
"When they (the IMF's mission to Sri Lanka) go to their board, we will request a waiver. The deviations are for good reasons," he said, referring to higher-than-expected government spending on post-war reconstruction and infrastructure projects.
Sri Lanka also hoped to renegotiate the IMF target for its 2010 budget deficit, Ranasinghe added.
Sri Lanka's 2009 deficit hit an eight-year high of 9.7 percent of the gross domestic product, much higher than a target of 7 percent agreed with the IMF, and authorities have said it would also miss its goal for 2010.
The IMF loan has helped to stabilise the rupee currency LKR= and boost global investor confidence in the South Asian country.
Delays in disbursements could undermine foreign investment in the country as it looks to recover from a 25-year civil war. They could also raise Sri Lanka's borrowing costs for a 10-year, $500 million sovereign bond sovereign bond it expects to sell later this year.
The IMF approved the loan last July to help Colombo avert a balance of payments crisis, but it said on Feb. 25 that it was delaying the third tranche of the financing until it sees the new budget, which is expected after April 8 parliamentary elections.
Since the announcement of the delay, foreign investors have sold a net 2.2 billion rupees ($19.3 million) worth of shares on the local stock exchange.
According to the terms of the loan, Sri Lanka has to reduce its budget deficit to an ambitious target of 6 percent by end of this year to ensure the next six tranches of the loan are disbursed without delays.
However, the island nation's finance ministry has already estimated the deficit at 7.5 percent.
"During the next IMF visit after the elections, the government will discuss the numbers," Ranasinghe said.
The 6 percent target would exclude the cost of reconstruction in the war-torn north and east, he added. (Editing by Kim Coghill)
By Courtesy of www.in.reuters.com
15th March, 2010.
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Sri Lanka should come out from this dependency on IMF. Dependency and boasting about the loans are not a good thing for a country. Now the ‘Terrorist Insurgency’ is over. Sri Lanka should win the economic war front too. President Mahinda Rajapaksa can do it if he has the will and form a good team after the ‘General Elections’. If President gets corrupt and incompetent people around him then his image will be tarnished and he will be another ‘Chandrika’. But during the last five years President Rajapaksa has shown that he is a ‘Patriotic’ and intelligent president. We will see how he is selecting his team after the general elections.
By Chinthaka.
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