📈 IMF Concludes Sri Lanka Visit: Economic Resilience Maintained Amid External Shocks

An International Monetary Fund (IMF) team led by Mr. Evan Papageorgiou concluded a staff visit to Colombo (June 24–30, 2026) to assess macroeconomic developments and progress under the Extended Fund Facility (EFF). Overall Macroeconomic Impact • Inflation: Headline inflation rose from 1.6% y/y in February 2026 to 5.5% y/y in May due to energy price hikes driven by the Middle East war. • External Sector: Tourist arrivals growth softened, and gross international reserves accumulation decelerated. • Policy Responses: Central Bank hiked rates by 100 bps; government rolled out temporary fuel, electricity, and fertilizer subsidies alongside cash transfers. Key Sector & Reform Breakdowns • Fiscal Policy: Authorities committed to reverting to a primary balance target of 2.3% of GDP by 2027 following fiscal easing in 2026. • SOE & Energy: Accelerating state-owned enterprise (SOE) restructuring and maintaining cost-recovery energy pricing remain critical to minimizing fiscal risks. • Debt Management: Debt restructuring is nearing completion, though capacity building for the Public Debt Management Office must accelerate. Next Steps • Performance will be formally assessed in the upcoming Seventh Review of the EFF arrangement in the fall of 2026.