The International Monetary Fund (IMF) program has been successful in helping Sri Lanka to sort out its fiscal problems, but the program has not been successful in getting the country into a more stable position of the external front, Institute of Policy Studies Deputy Director Dr. Dushni Weerakoon said.
Weerakoon said Sri Lanka has very thin policy levers with regard to exchange rate management.
Sri Lanka is exposed to any kind of external shocks with four months of import cover and the country needs an urgent injection of foreign capital.
The potential for external shocks has also increased with the global political situation and sudden spike in oil prices, Weerakoon noted.
“The IMF program in Sri Lanka is more of a stabilisation program which looks at fiscal targets and inflation targets to rebalance the macro economic stability.”
“In terms of medium term macro framework, it is very clear that growth is expected to remain stagnant at 5% during the 2016 to 2020 period .”
She also emphasized that Sri Lanka needs to adopt broad-based economic reforms to restart economic growth; Otherwise, Sri Lanka may have an extended period of low growth in a low inflationary environment.
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