Money printing fueling inflation; CBSL autonomy paramount - IMF Mission Chief

by Zulfick Farzan 02-09-2022 | 5:01 PM

COLOMBO (News 1st); IMF Mission Chief for Sri Lanka Peter Breuer pointed out that the printing of money by the Central Bank of Sri Lanka to finance the government in the absence of any other creditors is fueling inflation.

He told the BBC Sinhala Service that restoring the independence of the Central Bank and eliminating monetary financing will be a very important part to prevent rising inflation.

"We envisaged that the Central Bank Act, that ensures proper independence of the Central Bank, will be an important ingredient in restoring macroeconomic stability in Sri Lanka," said the IMF Mission Chief.

USD 2.9 Billion is not too little, and not too late, said Peter Breuer, the IMF Mission Chief of Sri Lanka in Colombo.

He told the BBC Sinhala Service that Sri Lanka has committed to a comprehensive set of economic reforms that will help put the economy back on a strong and durable growth trajectory, and this financing from the IMF will be available upon approval by the IMF Management and Executive Board.

He said the Extended Fund Facility from the IMF will help catalyze other financings from other sources, other multilateral lenders, bilateral flows, and private flows, that will help restore confidence in the Sri Lankan economy and regain growth, etc.

According to Peter Breuer, before the first tranche of the USD 2.9 Bn is disbursed, there are a number of matters that need to be addressed between the Staff-Level Agreement, and proposing a program to the IMF Executive Board.

"There are a number of prior actions agreed with the authorities, that they would undertake in order to continue with the economic reform that they have already started," he said citing the 2023 Budget which is consistent with the macroeconomic framework and targets that have been agreed on.

Peter Breuer stressed that creditors should encourage the IMF program, and work in collaboration if not Sri Lanka's crisis would be severe, and the economy would continue to shrink posing more risks to Sri Lanka's repayment capacity.