IMF 2003 Consultation with Sri Lanka

MF concludes 2003 Article IV consultation with Sri Lanka

Public Information Notice (PIN) No. 04/20

Public Information Notices (PINs) are issued, (i) at the request of a member country, following the conclusion of the Article IV consultation for countries seeking to make known the views of the IMF to the public. This action is intended to strengthen IMF surveillance over the economic policies of member countries by increasing the transparency of the IMF’s assessment of these policies; and (ii) following policy discussions in the Executive Board at the decision of the Board.

On March 5, 2004, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Sri Lanka.1

Background

Over the last 18 months, the Sri Lankan economy has advanced on several fronts: the peace process has moved ahead, albeit with interruptions; the economic recovery has taken firmer roots; external vulnerability has declined; and reforms in several areas have progressed. However, the economic effects of the two-decade long civil conflict are yet to be overcome, and many challenges remain. The government unveiled the needs assessment for the conflict-affected districts in June 2003, which, together with the poverty reduction strategy, ‘Regaining Sri Lanka,’ anchors the policies and reforms to enhance growth and reduce poverty over the medium term. These policies and reforms, as well as the peace process, have received strong support from the international community. In June 2003, at a conference in Tokyo, donors pledged about US$4.5 billion in aid over the medium term. Recently, domestic political uncertainty has increased, reflecting the impasse between the President and the Prime Minister’s government over the control of the Ministries of Defense, Interior, and Media.

Meanwhile, the economic recovery that began last year is becoming more broadly based. In 2002, private consumption and tourism were the main engines of growth. In 2003, exports were an added force, with private investment also picking up later in the year. GDP growth for 2003 is estimated to have risen to 5