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* IMF waiting for Sri Lanka's 2010 budget to release third tranche of loan
Tue, May 4, 2010, 12:21 pm SL Time, ColomboPage News Desk, Sri Lanka.

May 04, Colombo: The International Monetary Fund is to send a team to Sri Lanka next week to discuss the government's 2010 budget before approving the third tranche of the US $ 2.6 billion loan package.

According to a Bloomberg report, the IMF will conduct a "qualitative assessment" beginning May 12 and wait until the budget is presented to decide whether to grant the third installment.

"We are looking for a good budget with some serious commitment to contain the fiscal deficit," the IMF resident representative in Sri Lanka Koshy Mathai has told the Bloomberg News in a telephone interview.

In February, the IMF said Sri Lanka, exceeded the overall deficit target of 7 percent of GDP required to receive the third tranche of the US$ 2.6 billion stand-by agreement by a substantial amount and disbursing the installment would be delayed until after the general elections.

The Treasury Secretary Dr. P.B. Jayasundara said last week that President Mahinda Rajapaksa will authorize three months of expenditure until July 22 followed by a mini-budget for the rest of 2010. This will allow the government enough time to present the much-needed fiscal reforms in 2011 budget, he said.

Jayasundara says a budget deficit target of 7.5 percent of GDP could be achieved comfortably as the expenditure would be the same as last year and the revenue will be increasing.

However, under the IMF stand-by agreement approved in July 2009, the government is expected to reduce the deficit to 6 percent of GDP in 2010 from 7 percent last year, and to reduce it to 5 percent by 2011. The last year's budget deficit was 9.7 percent of GDP.

The Treasury Secretary expects the economic growth to be about 7 percent this year.

"The reserves are more than the IMF target. I am optimistic of the IMF releasing both the third and fourth tranche together," he said.

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