International Monetary Fund has completed the combined Fifth and Sixth Reviews of Sri Lanka’s economic reform program under the Extended Fund Facility (EFF), granting the country immediate access to approximately US$695 million in financial support.
According to the IMF, the latest disbursement amounts to SDR508 million and brings the total financial assistance provided to Sri Lanka under the program to SDR1.778 billion, equivalent to around US$2.4 billion.
The 48-month EFF arrangement was originally approved on March 20, 2023, with a total value of SDR2.286 billion, or roughly US$3 billion.
The IMF stated that the program aims to restore Sri Lanka’s macroeconomic stability by strengthening fiscal sustainability, rebuilding foreign reserves, protecting vulnerable communities, safeguarding price stability, reducing corruption vulnerabilities and implementing growth-oriented reforms.
Following the Executive Board meeting, IMF Deputy Managing Director and Acting Chair Kenji Okamura said Sri Lanka had continued strong implementation of reforms despite difficult circumstances.
He noted that the country’s economic resilience had helped authorities respond to both Cyclone Ditwah and the ongoing Middle East conflict, although the war had significantly worsened Sri Lanka’s economic outlook.
The IMF projects Sri Lanka’s economic growth to slow to around 3 percent in 2026, citing rising oil prices, inflationary pressures and reduced tourism earnings as key risks.
The statement further noted that uncertainty surrounding the intensity and duration of the Middle East conflict continues to increase downside risks to the economy.
The IMF also endorsed the government’s temporary relief measures and additional spending plans aimed at supporting recovery and reconstruction following Cyclone Ditwah.
However, it emphasized that from 2027 onward, Sri Lanka must return to its targeted primary budget surplus of 2.3 percent of GDP while maintaining expenditure discipline.
The IMF highlighted that while overall program performance remains strong, further reforms are still needed in public financial management, investment management and the electricity sector.
The organization also stressed the importance of strengthening revenue collection through a medium-term revenue strategy to improve the efficiency of the tax system and support economic growth.
Debt restructuring efforts are nearing completion, according to the IMF, although debt sustainability risks remain elevated.
The statement added that monetary policy should continue prioritizing price stability, while greater exchange rate flexibility and the gradual removal of balance-of-payments restrictions are necessary to rebuild Sri Lanka’s external resilience.
The IMF concluded that carefully calibrated structural reforms and renewed public infrastructure investment will be critical to improving the investment climate and increasing the country’s long-term growth potential.
