07/27/2009, 00.00
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The IMF asks Sri Lanka for economic reforms and national reconciliation

by Melani Manel Perera
A loan of 2.6 billion dollars approved. Main aims of funding include; rebuilding foreign currency reserves, correcting a chronic deficit, curbing the flight of capital and bridging the gap in the balance of payments.

Colombo (AsiaNews) - The International Monetary Fund (IMF) has approved a loan of 2.6 billion dollars to Sri Lanka. After 20 months of negotiation, IMF authorities have decided on the financing, overcoming the resistance of some Western countries that opposed the loan over failures of the government in Colombo to ensure human rights especially in relation to the Tamil population.

Takatoshi Kato, Deputy Director Administration and President of the Fund, has asked the Mahinda Rajapaksa’s government to implement far reaching economic reform. The agreement between the two sides includes Colombo use of the substantial loan to rebuild the reserves of foreign currency, correct the chronic deficit, curb the flight of capital and bridge the gap in the balance of payments.

For IMF authorities, the end of the conflict against the Tamil Tigers in Sri Lanka offers the opportunity to initiate a national reconciliation process that provides economic and social stability for the country. Kato said that the Fund is requesting that Colombo, on the one hand, "restore power to the competitiveness of Sri Lankan exports", and on the other initiate economic policies that "are able to control inflation and ensure adequate access to credit for the private sector".


The agreement between Colombo and the IMF will see the loan disbursed in stages. The first, already allocated, is 322.2 million dollars and will serve the government of Rajapaksa to immediately start the rehabilitation program and at the same time stem the fallout of the global financial crisis on the economy of the country.

The authorities in Colombo and the country's Central Bank show great satisfaction with the loan obtained, and promise the full implementation of the ambitious program for the revitalization of the country. Critical voices, however, are not lacking, which complain about a total disregard for the least protected sections of the population. Commentators and representatives of civil society argue that government policies promote an economy centred on exportation and the free market to the detriment of the living conditions of the large slice of the population that relies on traditional work for its livelihood.

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