Breaking News
Krishani
Krishani
Oct 05 2026
27Sri Lanka has reached a staff-level agreement with the International Monetary Fund (IMF) on the seventh review of its four-year Extended Fund Facility (EFF) programme, while also concluding discussions under the 2026 Article IV Consultation.
The agreement follows constructive discussions between IMF officials and the Sri Lankan authorities and remains subject to approval by the IMF Executive Board.
According to IMF Mission Chief for Sri Lanka Evan Papageorgiou, Sri Lanka could receive SDR 254 million (approximately US$345 million) once the Executive Board approves the review. This would bring total disbursements under the current IMF programme to SDR 2.032 billion, or around US$2.7 billion.
The IMF said Board approval will depend on two key conditions: the presentation of Sri Lanka’s 2027 Budget to Parliament in line with programme parameters and completion of a financing assurances review, including confirmation of multilateral financing contributions and adequate progress on debt restructuring.
The IMF said Sri Lanka’s economy has remained resilient despite successive shocks. Economic activity expanded by 4.2% year-on-year in the second quarter of 2026, marking the country’s 11th consecutive quarter of strong growth.
Headline inflation stood at 8% year-on-year in September, while gross official reserves had risen to US$6.9 billion at the end of August. The IMF also noted that Sri Lanka’s banking sector remains well capitalised and profitable, while fiscal performance during the first half of 2026 was strong and the country’s debt restructuring was largely completed.
Despite the progress, the IMF cautioned that Sri Lanka remains exposed to significant downside risks, including uncertainty surrounding the duration and intensity of the Middle East war, changes in global trade policy and the potential effects of El Niño.
The Fund urged the government to maintain prudent economic policies and continue structural reforms to protect the gains achieved under the programme.
In particular, the IMF recommended allowing domestic fuel prices to adjust in line with international prices while maintaining cost-recovery energy pricing. Any government support, it said, should be targeted, temporary, properly budgeted and carefully costed.
The IMF also called for stronger use of poverty-targeted cash transfers to protect vulnerable households and improvements to the country’s social safety-net system.
The Fund stressed that Sri Lanka should continue with its broader reform agenda, including the development of a medium-term revenue strategy aimed at improving tax efficiency, fairness and policy certainty for investors.
It also called for improvements in public investment management to overcome obstacles to capital spending and accelerate recovery and reconstruction following Cyclone Ditwah.
Greater exchange-rate flexibility was identified as important for absorbing external shocks and supporting reserve accumulation. The IMF additionally emphasised the importance of preserving Sri Lanka’s anti-corruption legislative framework.
To achieve stronger and more inclusive growth, the Fund recommended reforms to liberalise trade, modernise business and labour regulations, expand access to finance, advance digital public infrastructure and address infrastructure gaps.
The IMF mission visited Sri Lanka from September 10 to 23, 2026, before holding virtual discussions with Central Bank Governor Dr. P. Nandalal Weerasinghe, Treasury Secretary Dr. Harshana Suriyapperuma, Senior Economic Advisor to the President Duminda Hulangamuwa and other senior officials to finalise the agreement.
The IMF thanked the Sri Lankan authorities for what it described as excellent discussions and strong collaboration.
