June 20, 2018 / 11:30 AM / 4 months ago

IMF says Sri Lanka's economy remains vulnerable to shocks, due to high debt

COLOMBO, June 20 (Reuters) - The International Monetary Fund (IMF) on Wednesday said Sri Lanka’s economy remains vulnerable to adverse shocks because of sizable public debt and large refinancing needs.

The global lender, which has lent $1.5 billion to Sri Lanka, urged sustained reforms to safeguard the country’s economic gains, strengthen resilience, and support inclusive growth.

“The central bank.. has effectively curbed credit growth and stabilized inflation, despite recent pressures. However, the economy remains vulnerable to adverse domestic and external shocks, given the still sizable public debt, large refinancing needs, and low external buffers,” the IMF said in a statement.

It also said the economy’s expansion is expected to normalize gradually following subdued growth in 2017 and expects Sri Lanka to grow at 4 percent in 2018 and around 5 percent over the medium-term.

Finance Minister Mangala Samaraweera on Tuesday said the economy is likely to grow around 4.5 percent this year below the central bank estimate of 5 percent.

The IMF praised recent reforms such as the implementation of a new revenue act and approval of an automatic fuel-pricing formula.

But the lender said there’s a need for systematic and transparent project appraisal and selection of large-scale investment projects to ensure consistency with fiscal targets and mitigation of fiscal risks, due to the country’s “still high public debt.” (Reporting by Ranga Sirilal; Writing by Shihar Aneez; Editing by Richard Borsuk)

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