"Last year was a prime example of why we needed the International Monetary Fund (IMF) to address short term payment imbalances. The year was filled with global volatility; the Chinese Yuan was devalued, the US Federal Reserve increased interest rates and as a result Sri Lanka, in our estimates lost about $ 2 billion in short term capital which had come in to the country in the preceding five years. It was a big hit on our balance of payments," Mahendran said addressing a media briefing at the Central Bank on Tuesday (12th April).

He added: "We hope to have the IMF loan address that gap and also signal to our investor community that we are pursuing policies that were at the highest level of good governance, in terms of fiscal and broad economic policies. Once that signal goes out, it will stabilise those outflows of capital."

The IMF Mission which recently concluded a visit to the country, said they had made "significant progress toward a staff level agreement with the government on an economic programme that could be supported by a 36-month Extended Fund Facility (EFF). Programme discussions will continue in Washington D.C. on the margins of the Spring Meetings of the IMF and World Bank, with the objective of concluding a staff-level agreement with the authorities, subject to approval by IMF Management and the Executive Board, in the next two weeks." Mahendran also said: "We hope to get some form of viable assistance to be announced in the next couple of weeks."

The government, he said, hoped to raise US$ 2.5 billion in government borrowings this year.

Amongst other concerns, the Governor observed that they would have to seriously look into raising government revenue collection between 13-18 percent and increase exports.

"We can no longer follow an import substitution policy," he said. (CDN)