The International Monetary Fund (IMF) has completed the combined fifth and sixth reviews of Sri Lanka’s Extended Fund Facility (EFF) programme, approving an immediate disbursement of around US$695 million.
With the latest tranche, total IMF financial support disbursed to Sri Lanka under the programme has reached approximately US$2.4 billion.
In a statement issued on Wednesday, the IMF said Sri Lanka’s performance under the reform programme remained “generally strong”, despite global and domestic challenges, including the war in the Middle East and the aftermath of Cyclone Ditwah.
The IMF noted that Sri Lanka had met all end-December 2025 quantitative performance criteria, while most structural benchmarks had either been achieved or implemented with delays.
The fund also confirmed that prior actions related to restoring fuel and electricity cost-recovery pricing had been completed.
However, the IMF said Sri Lanka had failed to observe two continuous performance criteria — avoiding new external payment arrears and refraining from imposing or intensifying import restrictions.
The IMF projects Sri Lanka’s economic growth to slow to 3% in 2026, down from 5% in 2025, mainly due to global uncertainties and rising oil prices linked to the Middle East conflict.
Inflation is expected to rise to 5% in 2026, while the current account balance is projected to return to a deficit.
The IMF said fiscal easing in 2026 was appropriate in response to economic shocks, including recovery spending following Cyclone Ditwah, but stressed that Sri Lanka must return to its fiscal targets from 2027 onwards.
Deputy Managing Director Kenji Okamura said sustained revenue mobilization, public financial management reforms, electricity sector reforms and debt restructuring efforts remained critical for long-term stability.
The IMF also stressed the need for greater exchange rate flexibility, rebuilding external reserves and implementing structural reforms to improve investment and economic growth. (Newswire)