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By Anusha Ondaatjie Sept. 8 (Bloomberg) -- The International Monetary Fund will visit Sri Lanka this week to review progress under its $2.6 billion loan agreement, the nation’s central bank said. The visit to the South Asian island, which begins tomorrow, is expected to help clear the way for a second payment of $322 million to Sri Lanka, Assistant Governor Nandalal Weerasinghe said by telephone from the central bank’s Colombo headquarters.
The Washington-based lender in July approved a 20-month arrangement that immediately provided $322 million to help Sri Lanka rebuild after the end of almost three decades of civil war and replenish foreign-exchange reserves that fell to an eight- year low of $1.27 billion in March. The island’s reserves rose to a record $3.9 billion, aided by IMF funds and foreign buying of rupee-denominated debt, the central bank said Aug. 28. Reserves have climbed 71 percent in four months and are above the level stipulated in the loan agreement with the IMF, the bank said Aug. 4. In return for the IMF loan, Sri Lanka agreed to reduce its budget deficit to 5 percent of gross domestic product by 2011, from 7 percent this year, and maintain flexibility in the exchange rate in order to build foreign reserves to cover 3 1/2 months of imports and bolster the economy.
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