Western economies largely controlled global lender - International Monetary Fund (IMF) has recommended Sri Lanka to include contingency budgeting for natural disasters in its 2019 budget and an automatic pricing mechanism for electricity, the latest assessment by the IMF executive board on the funding program for Sri Lanka point outs.

“Starting in 2019, the budget should include contingency budgeting for emergency cash support and infrastructure rehabilitation,” the IMF executive board said on its statement adding that Sri Lanka can benefit from a disaster risk financing framework.

“The planned introduction of an automatic pricing mechanism for electricity, combined with well-targeted safety nets, can help contain fiscal risks from droughts, given Sri Lanka’s reliance on hydro electricity generation,” the IMF said.

IMF staff also welcomed the authorities’ efforts to introduce disaster insurance and increase mitigation spending, and discussed options to improve disaster preparedness, with support from the World Bank:

“Unused appropriations can be channeled to build up reserves for future disasters, with stringent transparency requirements” IMF said adding that IMF assessed the risks from weather calamities like floods and droughts as high in the short to medium term and such disasters disrupt agriculture production and increase food inflation.

“Higher imports of food and fuel will worsen current account balance,” the IMF said adding that “Disaster-related spending will challenge fiscal consolidation.”

- Reporting by Devendra Francis