Lanka should accelerate reforms to its economy's resilience to domestic, external shocks: IMF

Projecting Sri Lanka's economic growth below four per cent, an International Monetary Fund team on Friday said the country should accelerate reforms to its economy's resilience to domestic and external shocks.

The comments came at a time when the Sri Lankan rupee plunged to its worst level vis-a-vis the US dollar. The rupee has collapsed from 153 to 169 against the US dollar so far this year.

The team led by Manuela Goretti said the authorities should sustain reform efforts to support trade, investment and inclusive growth.

"A strong policy mix and exchange rate flexibility are critical to strengthen the economy's resilience to market volatility, while supporting competitiveness and growth," it said.

"Macroeconomic performance has been mixed in the first half of 2018...The current account deficit widened on the back of higher fuel imports...while international reserves declined from their peak level in April, amid volatile global market conditions. Growth is projected to remain below 4 per cent in 2018, and gradually reach 5 per cent over the medium-term," the team added.

It noted that in the face of greater market volatility in emerging markets, the Lankan authorities have maintained a strong policy stance with prudent monetary policy and further fiscal consolidation.

"Reforms need to accelerate to strengthen the Sri Lankan economy's resilience to domestic and external shocks, given still significant vulnerabilities," it said.

The IMF team on Friday concluded its two-week visit to the island nation to hold discussions on the fifth review of the country's economic programmes supported by a three-year Extended Fund Facility.