Sri Lanka: Staff Report for the 2005 Article IV Consultation
IMF Staff Country Reports, September 13, 2005
Source details
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- Sri Lanka: Staff Report for the 2005 Article IV Consultation
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Bibliographic details
- Published: September 13, 2005
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781451823561.002
Executive summary and near-term outlook
- The fiscal deficit exceeded budget targets.
- A significant amount of government financing was provided by the central bank, which increased the growth in monetary aggregates and contributed to higher inflation.
- The near-term economic outlook is to a large extent shaped by the post-tsunami reconstruction effort.
- Reconstruction and a quick rebound in tourism should maintain growth momentum.
- Demand pressures and fuel price adjustments are expected to keep inflation in double digits.
Key findings
- Fiscal performance: fiscal deficit exceeded budget targets.
- Monetary developments: central bank financing to the government drove growth in monetary aggregates.
- Inflation dynamics: higher inflation linked to monetary expansion and anticipated fuel price adjustments.
- Growth drivers: post-tsunami reconstruction and a quick rebound in tourism are identified as the main supports for maintaining growth momentum.
Policy implications and risks
- Fiscal: existing fiscal slippage (deficit exceeding budget targets) implies a need to strengthen fiscal control to avoid further monetary financing.
- Monetary: reliance on central bank financing increased monetary aggregates, implying the need for tighter coordination between fiscal policy and monetary management to contain inflation.
- External and reconstruction-related risks: the pace and scale of post-tsunami reconstruction and the recovery of tourism are central to the near-term outlook; slower reconstruction or tourism rebound would weaken growth prospects.
- Inflation risk: demand pressures combined with fuel price adjustments are expected to sustain inflation in double digits.
Subject tags and keywords (as listed)
- Budget planning and preparation
- Environment
- Expenditure
- Monetary base
- Money
- Natural disasters
- Public debt
- Public financial management (PFM)
- Keywords: apparel sector, Budget planning and preparation, Colombo CPI, CR, equity price, Global, ISCR, Monetary base, monetary policy, Natural disasters, price, Sri Lanka CPI, staff revenue projection
Sri Lanka: Staff Report for the 2005 Article IV Consultation, September 13, 2005