May 13, 2009 / 12:18 PM / 11 years ago

Sri Lanka rupee, shares down on IMF loan doubt

* Investors, traders concerned on IMF loan skeptics

* Sri Lanka could default if IMF loan doesn’t come-brokers

* Failure to get IMF loan no risk-cbank governor

By Shihar Aneez

COLOMBO, May 13 (Reuters) - Sri Lanka's rupee LKR= and stock market .CSE fell on Wednesday on concern over doubts on a $1.9 billion International Monetary Fund (IMF) loan after a British minister hinted at withholding it to punish Sri Lanka.

The rupee fell 0.25 percent to 117.65/75 a dollar, from Tuesday’s close of 117.35/45.

British Foreign Secretary David Miliband on Monday raised doubts about whether Sri Lankan government could be trusted to use a $1.9 billion loan from the International Monetary Fund appropriately. [ID:nN11548652]

“The market is not confident of the IMF loan at all now,” said a currency dealer.

However, the Central Bank Governor Ajith Nivard Cabraal told Reuters the views expressed by individuals were political speculation.

“There is absolutely no risk as far as we are concerned,” he said. “IMF is not a political organisation and we have requested the loan well ahead of the time we need it. There are (dollar) inflows and enough reserves. So we can meet any obligations.”

Though U.S. officials have said Washington wanted to delay the loan, the U.N. Security Council has said it should not be used as part of any punishment. [ID:nSP278610] [ID:nN29549850]

Analysts say though some countries tried to delay the IMF loan after Sri Lanka refused for a truce in an apparent final fight against Tamil Tiger rebels, Sri Lanka could still survive without IMF money due to donor funds for post-war development.

The rupee hit a record low of 120.80/121.10 on April 23, mainly on market expectations of a further fall in the rupee as part of conditions by the global lender for the loan.

Sri Lanka’s government sought the loan from the global lender of last resort to help weather the financial storm and avert a balance of payment crisis.

The rupee has fallen around 8.24 percent since Oct. 30 and 4 percent so far this year, after the central bank allowed some depreciation to conserve dollars and help exporters.

Treasury bill yields fell marginally at a weekly auction. [ID:nCOL467903]

The Colombo All-Share index .CSE fell 0.96 percent or 18.17 points to 1,870.45, its second fall after hitting a six-month high on Monday.

“The market is concerned whether the country could default loans, in case if IMF money doesn’t come,” said Mohandas Thangarajah, a stockbroker at First Guardian Equities. “If that happens there is a risk in foreign investments in share market.

Shares in top mobile phone operator Dialog Telekom DIAL.CM fell 4.76 percent to 5 rupees, calculated on a weighted average, while top conglomerate John Keells Holdings JKH.CM shed 0.97 percent to 76.25 rupees. Turnover was 138.9 million rupees ($1.18 million), less than a third of last year’s daily average of 464 million rupees.

The interbank lending rate or call money rate CLIBOR edged down to 11.023 percent from Tuesday’s 11.023.

For secondary market rates, please see <0#LKBMK=>. ($1=117.70 Sri Lankan rupees) (Editing by Bryson Hull)

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