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Here is a brief overview of balance of payments situation in Sri Lanka.
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Balance of Payments in Sri Lanka

The International Monetary Fund’s (IMF) $2.6 billion loan to Sri Lanka in 2009 is aimed at helping the island nation avert a balance of payments crisis by boosting the central bank’s reserves. The IMF  expects Sri Lanka’s economy to grow at more than 3 percent in 2009 and rebound in 2010.
 
Experts believe, the end of the ethnic conflict will certainly have a positive impact on Sri Lanka’s growth. The Sri Lankan Government’s program is quite ambitious in addressing the problems or the root causes that created the vulnerabilities to the economy.
 
The IMF’s executive board approved the 20-month arrangement that immediately provided $322 million to the island nation. Sri Lanka aims to cut its budget deficit to 5 percent of gross domestic product and maintain flexibility in the exchange rate to build reserves to cover 3 1/2 months of imports by the end of the IMF lending program.
 
Sri Lanka’s reserves declined by more than half in the six months that began in September 2008  to as little as $1.4 billion as the global recession hurt export earnings, prompting it to start talks with the IMF.

Foreign reserves stood at $1.705 billion in July 2009, which the IMF felt was a level still low. The nation’s reserves growth will depend on the global economic recovery, Sri Lanka will need a flexible exchange rate to attract foreign funds.
 
Interest rates have come down in Sri Lanka in 2009, taking advantage of inflation at a five-year low, in a bid to spur spending and investment and make up for slowing exports.
 
Balance of Payment in Sri Lanka from 2004 to 2006
 
Balance of Payments (in U.S.$
millions)
2004
2005
2006
Current account balance
-626
-1,161
-999
Current account balance (in percent
of GDP)
-3.2
-5.3
-4.2
Transfers (private and public)
1,358
1,704
1,670
Capital account
414
1,219
1,132
Official financial inflows
326
770
676
Overall balance
-212
58
133
 

Last Updated on: 17-05-2010


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