IMF strikes staff-level deal with Sri Lanka

Sri Lanka and the International Monetary Fund (IMF) have reached staff-level agreement on economic policies to conclude the combined fifth and sixth reviews of the island nation’s reform programme, the global body said in a statement on Thursday.

An IMF team was in Sri Lanka from March 26 until April 9 to conduct the combined fifth and sixth reviews of Sri Lanka’s reform programme supported by the global lender’s Extended Fund Facility (EFF).

The two tranches together will release $700 million from the $2.9 billion bailout in 2023. The IMF noted that ongoing economic reforms implemented by Sri Lankan authorities have supported the country’s recovery, with foreign reserves increasing and both real GDP growth and revenue mobilisation exceeding expectations.

“Sri Lanka’s ambitious reform agenda continues to deliver commendable outcomes. The economy grew by 5 per cent year on year in 2025. Inflation has returned to positive territory and rebounded to 2.2 per cent year on year in March, and gross official reserves reached US $7 billion in end-March 2026,” the IMF statement said in Colombo at the end of their visit.

Fiscal performance in 2025 was strong, primarily supported by taxes on motor vehicle imports. Debt restructuring is nearing completion, with the successful completion of Sri Lankan Airlines’ debt exchange and further progress in finalising remaining bilateral agreements.

“Sri Lanka is significantly exposed to the West Asia conflict, which has heightened energy prices, disrupted a key air hub for tourists, and affected Sri Lankans working in the region,” it said. “Authorities have ameliorated disruptions to economic activity by securing sufficient fuel supplies for households and industries.  At the same time, the country needs to address the infrastructure and spending needs caused by Cyclone Ditwah.”

“Heightened downside risks to the economy from disaster risks, persistent trade policy uncertainty and the conflict in the Middle East emphasise the urgency to accelerate the reform momentum to safeguard macroeconomic stability, enhance Sri Lanka’s resilience to shocks, and maintain the economy on a path toward recovery and inclusive growth”.