IMF UPGRADES SRI LANKA’S STATUS TO MIDDLE INCOME
Move Reflects Strong Economic Performance
in Recent Years
The International Monetary Fund has recognized
Sri Lanka as a country with a 'Middle Income Emerging Market'
status, upgrading Sri Lanka from the list of Poverty Reduction
and Growth Trust (PRGT) eligible countries.
The new designation is further recognition of
Sri Lanka’s rapid economic growth following the end of its
25-year-long conflict with the terrorist group LTTE. Since the
fighting concluded in May 2009, Sri Lanka’s Colombo stock
market has posted record returns and its industries - particularly
tourism - have rebounded with impressive speed.
The IMF’s upgrade in income-level status
was made on Jan. 11, 2010. It recognizes Sri Lanka’s long-term
growth trend and it will allow Sri Lanka to project itself strongly
in international financial and capital markets, according to the
Central Bank of Sri Lanka.
A country graduates from PRGT only if it has
enjoyed income per capita well above the International Development
Association (IDA) threshold for a number of years, has the capacity
for durable and substantial access to international financial
markets and does not face serious short-term vulnerabilities,
according to the Central Bank.
The Central Bank also noted that the Executive
Board of the IMF has taken into account the following specific
factors in considering of Sri Lanka’s graduation.
Strong economic performance in recent
years that has substantially lifted Sri Lanka’s per
capita Gross Domestic Product (GDP) to US dollars 2,014 by
2008, well above the prevailing IDA threshold, and its per
capita Gross National Income (GNI) has not been on a declining
trend for the last 5 years. The strong growth performance
has signalled substantial resilience to shocks, including
shocks to oil prices, and to the expiration of the Multi-Fibre
The availability of an IMF Stand-by Arrangement
facility as approved in July 2009 to cushion the impact of
the global crisis. Further, the economic developments under
the programme have been stronger than expected, with GDP growth
expected to return to almost pre-crisis levels in 2010, while
exports have been showing signs of recovery.
The country’s public external debt
being projected to decline gradually over the medium term.
Although debt dynamics remain sensitive to currency depreciation
and export shocks, the timely implementation of fiscal consolidation,
as envisaged in the Stand-by Arrangement programme, will be
crucial to ensure that the public debt remains on a sustainable
The country’s ability to access
international capital markets in the past years and its ability
to meet the market access criterion. Oversubscription of the
recently issued five-year sovereign bond reflected the progress
made under the Fund-supported program, and signalled good
prospects for continued access to international capital markets.
Embassy of Sri Lanka
21 January 2010