Ex-CB Governor Coomaraswamy says people will have to swallow bitter medicine; no point in blaming IMF

The IMF would recommend policies that would be unpleasant to the people, former Central Bank Governor, Dr. Indrajit Coomaraswamy, told an event held in Colombo on Tuesday (29).

The former Governor added that Sri Lankans needed to reduce investment and consumption.

“Going to the IMF is like going to a doctor. You go there when you become sick. So you can’t then blame the doctor for giving medicines that’s bitter. So when you go to the IMF, the IMF does meet out remedies which are not pleasant, because it is usually when you are living beyond your needs, that you need to essentially compress investment and consumption to bring your economy into better balance,” he said.

Dr. Coomaraswamy said East and South-East Asian countries have grown rich because of the surpluses in their balance of payments.

“It is due to their export performances, but in Sri Lanka growth is correlated to the size of the budget deficit,” he said.

The former Central Bank Governor added that Sri Lanka is talking to the World Bank and the Asian Development Bank (ADB) to secure 1.9 billion US Dollars. This will come after a programme with the IMF is finalized, he said.

He said the IMF will give 2.9 billion US Dollars in tranches to the Central Bank after debt sustainability is achieved. Multilateral lenders would then be able to resume lending to the government, he said.

“Multilateral lenders and Japan will give loans for projects which will boost economic activities. Banks would also find it easier to resume or extend their credit lines with an IMF programme in place.