IMF Deputy Managing Director and Acting Chair Kenji Okamura says the progress achieved through Sri Lanka’s ongoing economic reform programme has strengthened the country’s economic resilience despite global and domestic challenges.
In a statement issued following the completion of the combined Fifth and Sixth Reviews of Sri Lanka’s economic reform programme under the Extended Fund Facility (EFF), Okamura stated that the reforms had helped preserve economic stability and provided room for the country to respond to the impacts of Cyclone Ditwah and the Middle East conflict.
“Sri Lanka’s strong implementation under the EFF arrangement has continued despite challenging circumstances,” Okamura said.
The successful completion of the combined reviews unlocks approximately US$ 695 million in financial assistance, bringing total IMF disbursements to Sri Lanka to around US$ 2.4 billion since the programme began.
Okamura noted that while the reform programme had improved resilience, the ongoing Middle East conflict has significantly worsened Sri Lanka’s economic outlook and increased downside risks.
“For 2026, growth is projected to slow down to 3 percent. Higher oil prices would increase inflation and weaken the current account, which would also be adversely impacted by lower tourism receipts,” he stated.
He further noted that uncertainty regarding the intensity and duration of the conflict has heightened risks to the country’s economic outlook.
The IMF Executive Board originally approved the EFF arrangement for Sri Lanka on March 20, 2023, amounting to SDR 2.286 billion, or approximately US$ 3 billion.
According to the IMF, the programme is aimed at restoring macroeconomic stability through measures including restoring fiscal and debt sustainability, protecting vulnerable groups, safeguarding price and financial sector stability, rebuilding external reserves, strengthening governance, reducing corruption vulnerabilities, and advancing growth-oriented structural reforms.
The statement further noted that fiscal easing in 2026 was appropriate in response to recent shocks, with the Government implementing a temporary relief package and allocating additional spending for recovery and reconstruction efforts following Cyclone Ditwah.
Okamura stated that from 2027 onwards, authorities remain committed to returning to the primary balance target of 2.3 percent of GDP and complying with expenditure ceilings.
While describing overall programme performance as generally strong, he stressed that further efforts are needed to complete reforms related to public financial management, investment management, and the electricity sector.
He also emphasized that sustained revenue mobilisation remains essential to improve the efficiency of the tax system and support economic growth, including through the development of a medium-term revenue strategy.
Although Sri Lanka’s debt restructuring process is nearing completion, Okamura warned that debt sustainability risks remain high.
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