Curb current account deficit: IMF to Sri Lanka

Dec 06 2012, 21:55 IST
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SummaryIMF said Sri Lanka should take steps to contain its current account deficit.

IMF today said Sri Lanka should take steps to contain its current account deficit by promoting a softer exchange rate and making exports more competitive.

"Imports have fluctuated to an unparalleled degree and from a macro economic perspective however useful imports are, they have to be financeable," said Koshy Mathai, IMF's resident representative in an address to a business gathering here.

In order to reduce the financing need, Mathai said the country should encourage a softer exchange rate regime and enhance exports.

As a petroleum importing country Sri Lanka must find ways to finance the increased prices of petroleum, he added. Current account deficit occurs when a country's total imports of goods, services and transfers is greater than the country's total export of goods, services and transfers.

Having faced a widening trade deficit, Sri Lanka as part of reforms started devaluing its currency in November 2011.

The Sri Lankan rupee has depreciated by around 18 per cent since then.

The government early this year introduced prohibitive imports tariff on motor car imports, a measure aimed at preserving foreign exchange reserves.

The central bank has forecast 7.2 per cent economic growth this year, after revising it down in March from an original 8 per cent. Growth last year was at a record 8.3 per cent.

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