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IMF approves US$695 Million disbursement to Sri Lanka after completing fifth and sixth reviews
Colombo, May 28 ( Daily Mirror) - The Executive Board of the International Monetary Fund (IMF) has completed the combined Fifth and Sixth Reviews of Sri Lanka’s economic reform programme under the 48-month Extended Fund Facility (EFF) arrangement, paving the way for an immediate disbursement of SDR 508 million (approximately US$695 million).
With the latest tranche, Sri Lanka’s total disbursements under the IMF-supported programme have reached SDR 1.778 billion, equivalent to about US$2.4 billion.
The IMF’s Executive Board had originally approved the EFF arrangement for Sri Lanka on March 20, 2023, amounting to SDR 2.286 billion, or nearly US$3 billion, aimed at restoring macroeconomic stability and supporting wide-ranging economic reforms.
According to the IMF, Sri Lanka’s reform programme focuses on restoring fiscal and debt sustainability while protecting vulnerable communities, safeguarding price and financial sector stability, rebuilding external reserves, strengthening governance and reducing corruption vulnerabilities, and advancing growth-oriented structural reforms.
Following the Board discussion, IMF Deputy Managing Director and Acting Chair Kenji Okamura stated that Sri Lanka’s strong implementation of reforms has continued despite challenging global and domestic circumstances.
He said that the economic reform programme had helped preserve resilience and provided room for the government to respond to the impact of Cyclone Ditwah and the ongoing Middle East conflict. However, the IMF warned that the war has significantly worsened Sri Lanka’s economic outlook and increased downside risks.
The IMF projects Sri Lanka’s economic growth to slow to 3 percent in 2026, citing concerns over higher oil prices, increased inflation, weaker external balances, and reduced tourism earnings. The uncertainty surrounding the intensity and duration of the Middle East conflict was also identified as a major risk factor.
The IMF said that fiscal easing in 2026 was appropriate in light of the shocks, while noting that the government has introduced temporary relief measures and allocated additional spending for recovery and reconstruction efforts following Cyclone Ditwah.
From 2027 onward, the Sri Lankan authorities are expected to return to the primary balance target of 2.3 percent of GDP and comply with expenditure ceilings under the programme.
The IMF further observed that overall programme performance remains strong, although additional efforts are needed to complete reforms in public financial management, public investment management, and the electricity sector.
The statement also stressed the importance of sustained revenue mobilization through a medium-term revenue strategy to improve the efficiency and growth potential of the tax system.
While debt restructuring is nearing completion, the IMF cautioned that debt sustainability risks remain high.
The IMF also highlighted that monetary policy should continue prioritizing price stability, while greater exchange rate flexibility and the gradual removal of balance-of-payments measures remain important to rebuild external buffers and strengthen resilience.
The institution added that well-calibrated structural reforms and renewed public infrastructure investment would be necessary to improve the investment climate and support long-term economic growth.
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