IMF recommendations Will act if needed: CBSL

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By 2017-08-13

By Mario Andree

The Central Bank of Sri Lanka has agreed to tighten the monetary policy and use 'macro-prudential' measures to control inflation and credit growth if the need arises. The International Monetary Fund called for a tightened monetary policy to rein in inflation and credit growth.

"Inflation and credit growth remain on the high side. While monetary policy was tightened in March, further tightening is desirable until clear signs emerge that inflation pressures and credit expansion have subsided," the IMF stated.

"The authorities agreed to closely monitor credit growth, particularly to ensure that credit growth was directed towards productive economic activity, and to tighten monetary policy further and use macro-prudential measures, if necessary," the IMF said. Further, according to the IMF, Sri Lanka needs to strengthen its reform momentum building on the current progress.

The IMF said that for the country to reduce risk of debt distress, fiscal consolidation should continue with expenditure management, State-owned enterprise (SOE) reforms, implementing of the proposed Tax Bill and strengthening of the value added tax (VAT) system.

The agency also called for greater exchange rate flexibility.

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