Sri Lankan growth at risk, IMF says

Colombo: The International Monetary Fund (IMF) has warned that Sri Lanka's "impressive econ-omic growth" was at risk unless it shored up its balance sheet and trimmed reliance on short-term foreign debt amid the global credit crunch.

The IMF said it expects economic growth to slow to 6.1 per cent in 2008, below the central bank's estimated seven per cent and the 6.8 per cent recorded last year. It predicted growth of 5.8 per cent in 2009.

"[IMF] directors expressed concern that the combined build-up of macroeconomic imbalances, balance sheet vulnerabilities, high inflation, and external financing poses serious risks to economic stability," the IMF said in its annual assessment of Sri Lanka.

Vulnerable

It said the global financial crisis, which has drastically cut the availability of credit, had made "Sri Lanka's external accounts ... vulnerable to a reduction in international investor risk appetite".

Sri Lanka has increasingly sought high-interest foreign commercial borrowings since October 2007 through syndicated loans and a sovereign bond issue in order to avoid local commercial loans that attract a rate of over 20 per cent.