The continuance of the US$ 2.6 billion International Monetary Fund (IMF) standby facility programme is still important to Sri Lanka and a ‘great comfort’ although reserves have been built to record levels, slightly above US$ 5 billion enough to finance imports for six months.

"There is a debate that Sri Lanka can now forget about the IMF and go ahead with its development agenda now that reserves have been built up to adequate levels, but we must be cautious and the situation can easily change," warned the Institute of Policy Studies Executive Director Dr. Saman Kelegama.

Import expenditure is expected to grow faster than export earnings this year, and with global oil and food prices expected to increase as the global economy recovers, together with the government’s mounting debt repayment obligations, reserves could come under pressure.

"Currently foreign exchange reserves are adequate, but the situation can change with the large inflow of imports with higher growth in the economy and debt repayments. There have also been some outflows from the share market.

"The overall import bill is bound to increase as global oil and food prises increase. Export growth would be slow and import growth would far outweigh it and the exchange rate behaviour would depend on the reserve position," Dr. Kelegama said.

"This is why I believe the IMF package is a great comfort, and the fact that it comes in instalments would also ease any pressures as time goes on. The continuance of the IMF package would also increase investor confidence.

"These are some of the reasons why it is important for Sri Lanka to continue with the programme," he said.

The IMF is delaying the third US$ 326 million tranche because the government overshot the 7 percent of GDP budget deficit target, reaching 9.8 percent in 2009.