Mar 09, 2017

Uptick in SL’s inflation due to VAT - IMF Featured

Sri Lanka’s overall, macroeconomic performance in the second half of 2016 was mixed with gradually recovering growth and an uptick in inflation due to the impact of drought and the VAT increase, says the IMF in a report.

IMF LEE 640x360

The report was released following a visit by a staff team headed by Jaewoo Lee to Colombo from 21 February 21 to 7 March to hold discussions on the second review of the Sri Lankan authorities' economic programme that is being supported by a three-year extended fund facility.

The mission made significant progress toward reaching a staff level agreement with the government on completion of the second review. Further discussions will continue in April in Washington D.C. during the Spring Meetings of the IMF and World Bank, the IMF says in a statement.

While the current account remained stable, the financial account weakened with the resumption of capital outflows. A more prolonged drought could raise food and oil imports with adverse impact on growth, inflation, and the balance of payment, it said.

The IMF staff team met with premier Ranil Wickremesinghe, finance minister Ravi Karunanayake, Central Bank governor Indrajit Coomaraswamy, people’s representatives, government officials, international partners and business, civil society representatives during their visit.