IMF: Initial pressures on Sri Lankan market seem under control, it is necessary to take measures in favor of tourism

WASHINGTON (Reuters) – The International Monetary Fund (IMF) said on Tuesday that initial financial market pressures in Sri Lanka seemed under control after the "horrific" bombings on Easter Sunday, but decisive political and security measures are needed to consolidate the tourism sector, so important for the island.

At least 321 people were killed and about 500 wounded in Sunday's attacks on churches and hotels.

"The initial pressures on the financial markets seem to have been brought under control following the attacks," IMF head of Sri Lanka mission Manuela Goretti said in a statement in Washington. "The authorities will have to take decisive policy and security measures, particularly for tourism, which accounts for 5% of GDP, in order to take advantage of the solid results of recent years."

The Sri Lankan stock market index fell 2.6% on Tuesday, its first trading day since the attacks, while the rupee, heavily managed, remained stable at around 174.5 percent of the dollar.

Sri Lanka's $ 4.4 billion tourism sector is the third largest and fastest growing source of foreign exchange after remittances and clothing exports.

According to badysts, a collapse in tourism would be a blow to the Sri Lankan economy and potentially force it to demand an increase in IMF funds.

Last month, the IMF agreed to extend its $ 1.5 billion lending program to Sri Lanka for another year in 2020, an initiative that strengthened the island's status in the debt-to-equity market. top performing border this year. The IMF announced that its board would hold a final vote in mid-May on the extension and fifth review of the lending program, launched in 2016.

The extra year would give the Sri Lankan authorities additional time to "anchor macroeconomic stability and carry out their reform agenda," Goretti said, adding that the IMF was "deeply saddened by the horrific attacks in Sri Lanka. Lanka "and" joins the international community in condemning them. atrocious acts of terrorism. "

She said that Sri Lanka has made important progress in reforming its economy, including reforming its tax system, strengthening social protection programs and moving to central bank targeting of inflation. .

"The 2019 budget approved in early April establishes a good balance between a revenue-based fiscal consolidation, which is essential to boost market confidence, given Sri Lanka's high debt levels and refinancing needs, while allowing the place for very critical capital and social expenditures as well as for business-friendly expenses. fiscal measures, "she said.

The statement did not identify specific actions that the Sri Lankan authorities should take to ensure security and restore confidence in the tourism sector.