The International Monetary Fund (IMF) has finished the fifth and sixth reviews of Sri Lanka’s economic reform program under the Extended Fund Facility (EFF) arrangement. This completion allows Sri Lanka immediate access to a fund totaling 695 million US dollars. With this disbursement, the total IMF purchases under the arrangement reach 2.4 billion US dollars. The EFF arrangement, spanning 48 months and approved in March 2023 for about 3 billion US dollars, aims to support Sri Lanka’s efforts in restoring macroeconomic stability, enhancing debt and fiscal sustainability, safeguarding vulnerable groups, rebuilding external buffers, reducing governance and corruption vulnerabilities, and advancing structural reforms.
The IMF reported that Sri Lanka’s program performance was generally robust. The country successfully met all end-December 2025 quantitative performance criteria, while most structural benchmarks were either met or implemented albeit with delays. However, the Fund highlighted that two continuous performance criteria were not adhered to, specifically the obligation to avoid new external payment arrears and the mandate not to impose or escalate import restrictions. The IMF also cautioned about increased downside risks due to the Middle East conflict and Cyclone Ditwah’s aftermath. It projected a slowdown in Sri Lanka’s growth to 3 per cent in 2026, with average inflation expected to climb to 5 per cent. The IMF emphasized that higher oil prices could elevate inflation and weaken the current account, while reduced tourism receipts might further strain external balances.
IMF Deputy Managing Director and Acting Chair Kenji Okamura commended Sri Lanka’s reform progress for bolstering economic resilience and enabling a response to Cyclone Ditwah and the Middle East conflict. Okamura noted that fiscal easing in 2026 was deemed appropriate in light of the shocks, with the government rolling out a temporary relief package and allocating additional funds for recovery and reconstruction.
