2012年-IMF国际货币组织全球_Sri_Lanka_Seventh_Review_under_the_Stand_43页_1mb

Sri Lanka: Seventh Review Under the Stand-By Arrangement Summary

Core Content

The Seventh Review under the Stand-By Arrangement (SBA) for Sri Lanka, along with requests for waivers of nonobservance of performance criteria, extension of the arrangement period, rephasing of purchases, and establishment of new performance criteria, was conducted by the IMF staff team in consultation with other departments. The review was completed on March 16, 2012, following discussions with Sri Lankan officials in February 2012. The key documents include the staff report, a press release on the Executive Board discussion, and a statement by the Executive Director for Sri Lanka.

Main Points

Economic Performance in 2011

• Output Growth: Strong at $8 \frac{1}{4}$% in 2011, driven by robust domestic demand and healthy exports.
• Inflation: Subdued, easing back below 5% by the end of the year as food price pressures moderated.
• Credit Growth: Private sector credit grew by close to 35% (y/y) in 2011, fueled by ample liquidity and declining interest rates.
• Current Account Deficit: Widened sharply from $2 \frac{1}{4}$% of GDP in 2010 to $7 \frac{1}{2}$% of GDP in 2011, due to strong domestic demand and higher oil prices.
• Foreign Reserves: Declined from almost $8 billion in mid-2011 to under $5½ billion by early 2012, despite a 3% depreciation in November and increased swaps.

Program Performance

• End-June 2011 Targets: All quantitative targets were met.
• End-December 2011 Targets: Budget net domestic financing target was met, while the reserve money target was missed for technical reasons.
• Net International Reserves: Missed by nearly $2½ billion.
• State Energy Enterprises: Combined losses increased to $1 \frac{1}{2}$% of GDP in 2011, due to higher oil prices and a shift to more expensive thermal power.

Structural Benchmarks

• Most structural benchmarks were met.
• Two benchmarks remain outstanding: cabinet approval of the Petroleum Act amendments and the reform of the regulatory framework for private sector superannuation funds.

Key Policies Introduced

Exchange Rate Flexibility

• The authorities abolished the rupee trading band in early February 2012, allowing the exchange rate to adjust.
• The rupee depreciated by around 6% over 4 weeks to a level of approximately Rs 121/$.
• The central bank aims to phase out its intervention early in the second quarter.

Credit Growth Control

• The central bank raised policy rates by 50 basis points and instructed banks to reduce lending.
• Market rates increased by close to 150 basis points since late November.

Energy Price Increases

• Retail prices of petroleum products were raised by over 30% in early February.
• Fuel oil prices to the Ceylon Electricity Board (CEB) increased by 50%, while electricity prices rose by around 20%.
• These measures are expected to reduce the combined losses of the CEB and Ceylon Petroleum Corporation (CPC) by about 1% of GDP and increase government revenues by around $\frac{1}{4}$% of GDP.

Staff Assessment

Overall Progress

• Significant progress has been made since the SBA was launched in 2009.
• The economy has recovered strongly, inflation has fallen, and government finances have improved.

Challenges

• The delay in adjusting monetary and exchange rate policy in 2011 led to a significant erosion of foreign reserves.
• The transition to a more flexible exchange rate regime and credit policy needs time to be fully effective.
• The central bank will need to maintain a tight monetary stance and possibly increase policy rates to support the exchange rate and control inflation.

Fiscal Policy

• The 2011 budget deficit was reduced to 6.8% of GDP from 8.0% in 2010, in line with program objectives.
• The 2012 budget deficit is targeted at $6 \frac{1}{4}$% of GDP, which is considered appropriate given the projected contraction of the domestic deficit by over $1 \frac{1}{2}$% of GDP.

State Enterprise Reform

• The financial performance of the CEB and CPC has been a long-standing program objective.
• Recent price increases are a positive step, but long-term restructuring is needed to improve cost structures and pricing mechanisms.

Outlook and Risks

Economic Growth

• Expected to moderate to $7 - 7 \frac{1}{2}$% in 2012 due to tighter monetary and fiscal policies.
• Continued expansion in agriculture, construction, and tourism is expected to support growth.

Inflation

• The depreciation of the rupee and price increases are expected to raise consumer prices.
• First-round inflation effects are estimated at 4-5%, but the annual average is expected to remain in single digits.
• The central bank should be prepared to respond to inflation risks if oil prices remain high.

Balance of Payments

• Recent measures are expected to reduce the current account deficit to a more sustainable level.
• The outlook depends on continued tightening of monetary and fiscal policies and reversing the adverse shift in investor sentiment.

Reserves

• The authorities are on track to stabilize net international reserves by the end of the second quarter.
• Reserve buffers are expected to remain relatively low at around 2.7 months of imports and 75% of short-term debt.

Debt Sustainability

• The medium-term debt outlook remains broadly unchanged, with public debt projected to fall to around 65% of GDP by 2015.
• External debt is expected to be just over 40% of GDP.
• Roll-over risk has increased due to the decline in reserves and the rise in the current account deficit.

Requests for Waivers and Extensions

• The authorities request a waiver for nonobservance of the end-December 2011 performance criteria on net international reserves and reserve money.
• They also request an extension of the SBA until July 23, 2012, and rephasing of purchases to provide additional time for stabilization and policy adjustment.
• The establishment of new performance criteria for the Eighth Review includes an end-June 2012 target for net international reserves and indicative targets for net domestic financing and reserve money.

Conclusion

The staff supports the authorities' request for completion of the Seventh Review, given the progress made and the measures introduced to address balance of payments pressures and fiscal sustainability. The next few months are critical for consolidating the transition to a more flexible exchange rate regime and ensuring the effectiveness of the policy package. The program's extension through July 2012 would provide essential support during this adjustment phase.