The Sri Lankan Government has refused to release documents detailing the underlying basis of the IMF loan to Sri Lanka, but has started to comply with those terms.
The USD2.6 billion standby loan to Sri Lanka was granted earlier this year.
The Government released the memorandum of economic policies and technical memorandum of understanding, yet the staff report was not released.
This is the report that provides details of the reasoning and rationale behind granting the IMF loan, insiders said.
IMF mission Chief Brian Aitken told reporters in Colombo that "publishing that report is the prerogative of the government".
"You have to direct that question to the government, because it is their decision to publish. It is not our decision."
The IMF’s annual country report on Sri Lanka from last year has also been suppressed, contrasting with that of countries such as Pakistan, where the Pakistani Government have released all documents.
The reports can actually be obtained by representatives of foreign governments that form the executive board of the multilateral lender. But they are not available to the public, without authority from the Government.
After the first loan instalment of $322.2 million was paid in July, the second is awaiting approval from the IMF executive board.
Meanwhile, Sri Lanka is beginning to comply with the terms of the IMF loan, press reports said, even as they reiterated the Sri Lankan government’s claims earlier this year that there were no conditions.
In return for the IMF loan, Sri Lanka agreed to reduce its budget deficit to 5 percent of gross domestic product by 2011, from 7 percent this year, and maintain flexibility in the exchange rate in order to build foreign reserves to cover 3 1/2 months of imports and bolster the economy.
The Central Bank of Sri Lanka issued an official statement on October 8 stating that “the key targets and structural benchmarks as agreed with the IMF at the end of September 2009 were comfortably achieved by Sri Lanka.”
The statement went on to reassure the public that “This follows the successful achievement of the targets set for July 2009 as well.”
The Sunday Times newspaper questioned what the targets “agreed with the IMF” were, citing an earlier comment by the government that there were no conditions on the IMF loan.
Separately Sri Lanka’s central bank kept its benchmark interest rate unchanged at a three-year low, failing to follow through on a suggestion that rates could be cut.
Governor Nivard Cabraal had said the central bank has room to cut interest rates if inflation remains “persistently low” but there was no cut in rates.
“With inflation low, the central bank can afford to cut rates,” said Danushka Samarasinghe, research manager at Asia Securities Ltd. in Colombo.
Consumer prices will probably climb between 3 percent and 5 percent this year, and inflation may accelerate to between 5 percent and 6 percent in 2010, Cabraal said October 6.
The International Monetary Fund said on Sept. 22 it’s “cautiously positive” on the island nation’s prospects as it reviews the economy for the release of a second payment in its $2.6 billion loan package to Sri Lanka.
The outlook on Sri Lanka’s long-term foreign and local currency issuer default ratings was revised to stable from negative at Fitch Ratings on October 9. Fitch affirmed the country at B+.
