The International Monetary Fund has completed the combined fifth and sixth reviews of Sri Lanka’s 48-month Extended Fund Facility arrangement, making SDR508 million available and bringing total purchases under the program to SDR1.778 billion. The EFF, approved in March 2023 for SDR2.286 billion, supports Sri Lanka’s reform program to restore macroeconomic stability through fiscal and debt sustainability measures, financial and price stability, stronger external buffers, governance improvements, and structural reforms. The Board said program implementation has remained strong, but the economic outlook has worsened because of the Middle East war, with 2026 growth projected at 3 percent. It judged fiscal easing in 2026 appropriate to respond to the shocks, including temporary relief measures and additional spending for recovery and reconstruction after Cyclone Ditwah, while expecting a return from 2027 to the primary balance target of 2.3 percent of GDP and compliance with the primary expenditure ceiling. The IMF also highlighted the need to complete public financial and investment management reforms and electricity sector reforms, sustain revenue mobilization through a medium-term revenue strategy, keep monetary policy focused on price stability, allow greater exchange rate flexibility, and gradually phase out balance-of-payments measures. Debt restructuring is nearing completion, but debt sustainability risks remain high.
International Monetary Fund2026-05-27
International Monetary Fund completes Sri Lanka EFF fifth and sixth reviews and releases SDR508 million
The IMF completed the combined fifth and sixth reviews of Sri Lanka’s 48‑month Extended Fund Facility, unlocking SDR508 million and bringing total disbursements to SDR1.778 billion under the SDR2.286 billion arrangement. The Board noted strong implementation but a weaker outlook from external shocks, endorsed temporary fiscal easing in 2026 with a return to the primary balance target from 2027, and urged completion of fiscal, investment and electricity reforms, sustained revenue mobilization, price stability-focused monetary policy, greater exchange rate flexibility, and gradual removal of balance-of-payments measures. It said debt restructuring is nearly complete but debt sustainability risks remain high.