IMF Completes 5th & 6th Reviews for Sri Lanka, Approves US$ 695 Mn 📈

The IMF Executive Board has completed the combined Fifth and Sixth Reviews under the Extended Fund Facility (EFF), granting Sri Lanka immediate access to SDR 508 million (approx. US$ 695 million) to support ongoing economic reforms. • Overall Funding: This disbursement brings total purchases under the 48-month EFF arrangement to SDR 1.778 billion (approx. US$ 2.4 billion) out of the total US$ 3 billion package approved in 2023. • Program Performance: Implementation remains generally strong. All end-December 2025 quantitative performance criteria and prior actions on fuel and electricity cost-recovery pricing were met. Most structural benchmarks were completed, though some faced delays. However, continuous criteria on avoiding new external payment arrears and import restrictions were not observed. • Economic Outlook & Risks: • Due to the war in the Middle East and the aftermath of Cyclone Ditwah, economic growth for 2026 is projected to slow to 3%. • Higher oil prices are expected to increase inflation and weaken the current account, alongside lower tourism receipts. • Debt restructuring is nearing completion, though debt sustainability risks remain high. • Policy Response: The IMF noted that hard-won reform gains have preserved resilience. A temporary fiscal easing and relief package are being implemented in 2026 for cyclone recovery. The government remains committed to reverting to a primary balance target of 2.3% of GDP from 2027 onward, while prioritizing monetary price stability and exchange rate flexibility.