The Executive Board of the International Monetary Fund (IMF) has completed the combined Fifth and Sixth Reviews of Sri Lanka’s Extended Fund Facility (EFF) programme, unlocking immediate access to SDR 508 million (approximately US$ 695 million) to support the country’s ongoing economic reforms.
With the latest disbursement, total financing received by Sri Lanka under the 48-month EFF arrangement has reached SDR 1.778 billion (around US$ 2.4 billion), according to an IMF statement.
The IMF’s Executive Board had approved Sri Lanka’s EFF programme on 20 March 2023, amounting to SDR 2.286 billion, or about US$ 3 billion. The programme is aimed at restoring macroeconomic stability through fiscal and debt reforms, safeguarding financial and price stability, rebuilding external buffers, strengthening governance, reducing corruption vulnerabilities, and advancing growth-oriented structural reforms.
Following the Board’s discussion, IMF Deputy Managing Director and Acting Chair Kenji Okamura stated that Sri Lanka had continued to demonstrate strong programme implementation despite difficult circumstances.
He noted that gains from the reform programme had helped preserve economic resilience and created space for authorities to respond to the impacts of Cyclone Ditwah and the Middle East conflict, although the war had significantly weakened Sri Lanka’s economic outlook and increased downside risks.
The IMF projected Sri Lanka’s economic growth to slow to 3% in 2026, warning that higher global oil prices could drive up inflation and weaken the current account, compounded by lower tourism earnings. Uncertainty surrounding the duration and intensity of the conflict was also expected to heighten economic risks.
Okamura said fiscal easing in 2026 was appropriate in response to prevailing shocks, with the Government implementing a temporary relief package and allocating additional funds for recovery and reconstruction efforts following Cyclone Ditwah.
From 2027 onwards, however, the authorities were expected to return to the primary balance target of 2.3% of GDP and comply with expenditure limits.
While noting that overall programme performance remained strong, the IMF stressed the need to advance reforms in public financial and investment management as well as the electricity sector.
The statement also underscored the importance of sustained revenue mobilisation through a medium-term revenue strategy to improve the efficiency and growth orientation of the tax system.
Although debt restructuring efforts are nearing completion, the IMF cautioned that debt sustainability risks remain elevated.
The IMF further said monetary policy should continue to prioritise price stability, while greater exchange rate flexibility and the gradual removal of balance-of-payments measures would be essential to rebuild external buffers and strengthen economic resilience.
It added that targeted structural reforms and renewed public infrastructure investment would be necessary to improve the investment climate and enhance Sri Lanka’s long-term growth potential.
