30 September 2017 12:20 am Views - 4306
From left: IMF Mission Member Peter Lidner, IMF Mission Member Suchanan Tambunlertchai, IMF Mission Member Sarwat Jahan, IMF Mission Chief Jaewoo Lee, IMF Country Representative Eteri Kvintradze and IMF Mission Member Madahiro Nozaki
Pic by Damith Wickramasinghe
BY: Chandeepa Wettesinghe
The International Monetary Fund (IMF) yesterday warned Sri Lanka should be ready to change its monetary policy if any unexpected shocks lead to increased credit growth in already sensitive sectors of the economy, despite a clear decline in private credit growth.
“There is a clear change; the phase of the speed of credit picking up or remaining constant seems to have passed. The current expectation is for this trend to continue. However, if there is some change in this trend, or some unforeseen developments, then some policy measures, macroprudential measures will be advisable,” IMF Mission Chief Jaewoo Lee said.
He was speaking at a press conference convened to discuss the 3rd review under the US$ 1.5 billion Extended Fund Facility Sri Lanka subscribed to, in order to escape a balance of payment crisis.
Credit growth has fallen to around 18 percent now, compared to over 20 percent during the same period last year.
Lee said that both the Central Bank and the IMF are keeping a close eye on credit growth, especially into sectors such as real estate.
Credit extended to real estate is at an all time high, although the sector has seen some slowing down in recent months, and the Central Bank is hoping for a sustainable level of growth in the industry.
Meanwhile, Lee said that the Central Bank should keep an eye on the level of inflation in the economy and move towards a flexible inflation targeting policy regime.
“The Central Bank should continue to remain vigilant in monitoring inflation pressures and stand ready to tighten monetary policy if needed to contain inflation or credit growth,” he said.
Responding to questions that this same phrase was used during the previous review, Lee said that ‘it still remains true’.