ECONOMYNEXT – Sri Lanka has exceeded key quantitative targets set in an International Monetary Fund program for March 2024, based on preliminary data the Washington based agency said in a report.
The March data are not performance criteria on which reviews are conducted but are indicative targets which shows the progress of the program and are a stepping stone for a September review based on June data.
An indicative target for the primary balance (roughly overall deficit minus interest costs), was assessed at 316 billion rupees more than four times the 70 billion rupee target set in the program.
Primary balance can be a big surplus if the interest bill is high and capital expenditure is cut. It is a type of crisis management measure used by the IMF, after a central bank triggers a currency crisis by cutting rates with inflationary liquidity tools and goes it for help.
However, Sri Lanka’s Treasury has also kept a lid on most current spending, other than the interest bill which tends to shoot up after rates are cut with liquidity tools for flexible inflation targeting, to sterilize dollar sales or to target potential output.
In the last currency crises, which also triggered a default, interest rates went up higher than in previous crises due to fears of a Debt Sustainability driven induced default on rupee bonds with broadbased re-structuring. However it was averted by Sri Lanka officials which led to a 1,000 basis point fall in g-sec yields.
Meanwhile more taxes have been collected from the people to finance the island’s bloated state.
A 750 billion rupees central government tax revenue floor has been exceeded to reach 837 billion rupees.
More: https://economynext.com/sri-lanka-b...s-for-march-2024-amid-rupee-stability-168140/
The March data are not performance criteria on which reviews are conducted but are indicative targets which shows the progress of the program and are a stepping stone for a September review based on June data.
An indicative target for the primary balance (roughly overall deficit minus interest costs), was assessed at 316 billion rupees more than four times the 70 billion rupee target set in the program.
Primary balance can be a big surplus if the interest bill is high and capital expenditure is cut. It is a type of crisis management measure used by the IMF, after a central bank triggers a currency crisis by cutting rates with inflationary liquidity tools and goes it for help.
However, Sri Lanka’s Treasury has also kept a lid on most current spending, other than the interest bill which tends to shoot up after rates are cut with liquidity tools for flexible inflation targeting, to sterilize dollar sales or to target potential output.
In the last currency crises, which also triggered a default, interest rates went up higher than in previous crises due to fears of a Debt Sustainability driven induced default on rupee bonds with broadbased re-structuring. However it was averted by Sri Lanka officials which led to a 1,000 basis point fall in g-sec yields.
Meanwhile more taxes have been collected from the people to finance the island’s bloated state.
A 750 billion rupees central government tax revenue floor has been exceeded to reach 837 billion rupees.
More: https://economynext.com/sri-lanka-b...s-for-march-2024-amid-rupee-stability-168140/
