IMF Urges Sri Lanka to Safeguard Economic Gains amid Ongoing Reforms and upcoming elections

By: Staff Writer

September 17, Colombo (LNW): The International Monetary Fund (IMF) has acknowledged Sri Lanka’s significant strides in economic recovery but warns that the nation remains fragile and must continue to safeguard its progress. According to the President’s Media Division, the IMF stressed that while achievements have been made, the country still faces challenges.

Julie Kozack, Director of the IMF Communications Department, highlighted the importance of ongoing reforms, particularly with the presidential elections approaching.

She affirmed that the future of Sri Lanka’s political leadership is in the hands of its citizens but emphasized that meeting the objectives of the IMF’s program is crucial for the country to fully recover from its severe economic crisis. “Progress has been made, but the country is not out of the woods yet,” Kozack noted.

Kozack pointed to several key achievements under the IMF’s Extended Fund Facility (EFF) program, which included the IMF’s approval of the 2024 Article IV Consultation and the Second Review of the EFF in June, unlocking $336 million in funding for the country.

Positive trends such as economic growth recovery, subsiding inflation, increasing international reserves, and improved revenue collection were also highlighted as outcomes of the program.

However, despite these advancements, Kozack expressed concerns about Sri Lanka’s vulnerability to economic risks, underscoring the importance of maintaining reform momentum.

On the topic of debt restructuring, Kozack addressed questions regarding private creditors’ proposals. She noted that Sri Lanka had made progress by restructuring domestic debt and securing agreements with the official creditor committee and the Export-Import (EXIM) Bank of China.

However, she clarified that the IMF does not directly negotiate between Sri Lanka and its creditors but provides an overall debt sustainability assessment.

The timing of the IMF’s Third Review of Sri Lanka’s program will depend on the results of the presidential elections. Kozack confirmed that discussions with the government would resume after the elections, once a new administration is in place.

Kozack further reiterated the IMF’s support for Sri Lanka’s reforms and emphasized the need to preserve the hard-earned achievements.

The next program review is scheduled for mid-October, but any further talks will only happen once the election results are determined.

She also addressed speculation about revisiting the Debt Sustainability Assessment (DSA), confirming that these discussions will occur after the elections.

She concluded by noting that while the IMF’s role remains advisory and financial, critical milestones such as domestic debt restructuring and agreements with key creditors mark significant steps in Sri Lanka’s recovery efforts.