The Minister of Economic Reforms, Science and Technology Milinda Moragoda has had several fruitful meetings in Washington with key officials of the International Monetary Fund (IMF) and the World Bank yesterday.

At the IMF, he met Ms. Anne O Krueger, the First Deputy Managing Director and Shigemitsu Sugisaki, the Deputy Managing Director, who is directly overseeing Sri Lanka.  At the World Bank, he met Mr. Shengman Zhang, Managing Director, Ms. Mieko Nishimizu, Vice President for South Asia, Motornichi Ikawa, Executive Vice President of the Multilateral Investment Guarantee (MIGA) Agency of the World Bank.

According to Ministry sources Mr. Moragoda at these meetings had explained the broad development strategy of the new government on the lines laid down by the Prime Minister Ranil Wickramasinghe, in his January 22 address to the Parliament.

They exchanged ideas on how to make progress on economic reforms to overcome current economic difficulties and deep seated economic problems in Sri Lanka to help regenerate sustainable higher growth and enhance employment opportunities.

Mr. Moragoda elaborated on the approach of the new administration, including the on-going peace efforts, to make the most efficient use of the limited productive resources available in Sri Lanka without divisive politics and to work for a better future for all Sri Lankans.  In this regard, on behalf of the new Prime Minister, he sought enhanced co-operation and financial and technical support from the IMF and the WB.

According to the Ministry the officials of the two institutions were very pleased with the development strategy of the new government, as explained by the Minister and mentioned they would extend their fullest co-operation and support to help the country.  They were very hopeful that the new government would see early success in its approach to address the economic problems in Sri Lanka.

The Minister explained that the new government has already put in place a better administrative structure under the overall command of the new Prime Minister to improve policy formulation and implementation.  He said that there is a need for further rationalization of the structures, including through clearer delineation of work allocation and responsibilities to avoid duplication and to improve governance.

Mr. Moragoda had mentioned his ambition to introduce, as Minister for Economic Reforms, deeper economic reforms at the early stages of the new administration.  He particularly mentioned the need to improve the commercial viability of public corporations such as the CPC and the CEB, which have been incurring heavy operational losses.

He said that the strategy concentrates on promoting private sector participation in economic activity, for the benefit of the entire population.

Referring to the CPC, he mentioned that a flexible pricing formula has already been contemplated.  The urgent need to improve the viability of the state-owned banks was also emphasised.  He also mentioned about the need to improve accounting and information systems in the public sector, particularly aimed at better control of expenditure.

The Minister said that without trying to re-invent the wheel, all good economic policies of the previous administration will be carried forward and new reforms will be introduced to enhance medium-term growth potential of the economy and a comprehensive policy package will be articulated and implemented in the coming months.

He said that this package will be fully homegrown and would concentrate on economic reforms without making it a numbers game.  He mentioned that containing the fiscal deficit is important, but what is most important is to firmly establish the policy and institutional setting to ensure sustainable development.

At the IMF meetings, Mr. Sugisaki mentioned that the Stand By Arrangement (SBA) was intended to bridge the financing facility until an arrangement under the Poverty Reduction and Growth Facility (PRGF) was finalized.  He said that the SBA has gone off-track partly due to unexpected external factors and also due to policy slippages.

Both, Ms. Anne Krueger and Mr. Sugisaki stressed the urgent need to bring back budgetary discipline and curtailing overall budget deficit significantly to avoid a crisis.  Ms. Krueger mentioned that no-country could sustain such a high budget deficit without running into crisis and expressed deep concern about the sharp reduction of fiscal revenues during the last few years.  They had wanted the new administration to come up with a good economic policy package to ensure economic stabilization and to move on to a PRGF arrangement as early as possible.  Mr. Sugisaki commended the new Government’s approach and mentioned that a staff mission headed by Mr. Jeremy Carter has already left for Colombo to conduct SBA review discussions with the Government.  They mentioned that they were pleased to help and wished Sri Lanka all success.  The Minister also appreciated the work being done by Nadeem Ul Haque, the IMF’s Resident Representative in Sri Lanka.

At the meetings with the World Bank officials, Mr. Zhang, Ms. Mieko and Mr. Ikawa, the Minister particularly mentioned about the on-going efforts to improve the living conditions in the North and the East.  In this regard, the Minister stressed the need for support from the WB to facilitate the peace process.  Ms. Mieko mentioned that WB is already involved in the Northeast of Sri Lanka and would further examine the possibility of providing support, including through a re-allocation of existing commitments.  The Minister also indicated the need to expedite the finalization of the private sector development credit facility to support the on-going economic reforms.  The Minsiter also requested the WB support to develop a better system of government procurements.  The discussions also focused on the need for improving education health and communication and public awareness programs in the country.  The Minister also discussed the possible planning of the next Aid Group meeting to be held sometime in April or May, 2002.