Feb 12, Colombo: Sri Lanka has decided not to pursue a fresh support facility form the International Monetary Fund (IMF) but Colombo will continue to maintain the close relationship with the lender under standard consultation processes similar to many other member countries.

The Central Bank of Sri Lanka in a statement released Tuesday said since the completion of the US$ 2.6 billion Stand-by-arrangement (SBA) in July 2012, Sri Lankan authorities and the IMF have been engaging in a dialogue on the future relationship between Sri Lanka and the Fund.

Since Sri Lanka is in a better economic position now with gross reserves amounting to US$ 7 billion than with the US$ 1 billion of reserves it had when the SBA was approved in July 2009, there is very little need for the government to build up a further cushion in external reserves through traditional IMF Balance of Payment support programs, the Central Bank noted.

Under these circumstances, Sri Lankan authorities had expressed their interest only in a future IMF support to finance the budget to achieve government target of 5.8 percent of GDP fiscal deficit in 2013 and below 5 percent in years ahead.

However, following discussion Sri Lankan authorities had with the visiting IMF delegation, the IMF has indicated that the Fund may not be in a position to consider any direct or indirect budget support to Sri Lanka, since the current improved state of the country does not warrant unconventional and exceptional financial support.

According to the Central Bank, the IMF is also of the view that Sri Lanka has now developed well-established access to international capital markets and therefore budget support if necessary, could be conveniently accessed from such markets.

The IMF had concluded that therefore Sri Lanka has no need to access the Fund for such budget financing.

However, when the IMF delegation, headed by John Nelms and included IMF's resident representative in Colombo Koshy Mathai, met with members of opposition United National Party (UNP), they have expressed concerns over the government's economic policies to the visiting delegation.

Following the discussions with the IMF officials Sri Lanka has decided not to pursue a new program with the global lender.