Sri Lanka receives fresh IMF boost as economy stabilises
The International Monetary Fund (IMF) on Thursday said Sri Lanka’s debt sustainability risks remain high, although its debt trajectory continues to improve amid ongoing economic reforms under the programme supported by the global lender. The remarks came after the IMF completed the combined fifth and sixth reviews of the island nation’s economic reform programme supported by the 48-month Extended Fund Facility (EFF) arrangement, leading to the release of about USD 695 million.
With the latest disbursement, total IMF purchases under the arrangement have risen to around USD 2.4 billion, the Fund said. “Debt sustainability risks remain high, and we have described it as such in our assessment… Debt in general still remains quite high,” IMF Sri Lanka mission chief Ivan Papageorgiou told reporters in Colombo.
“However, it is very important to acknowledge that there has been significant improvement in the level of debt… most importantly, in where the debt trajectory is heading, we continue to see debt declining,” he said. Papageorgiou said the IMF still considers Sri Lanka’s debt risks manageable, but stressed that they must continue to be contained through strong policy reforms. He said it is important for Sri Lanka to maintain healthy economic growth over the medium to long term while keeping inflation under control.
Papageorgiou said the IMF’s Extended Fund Facility (EFF) programme over the past three-and-a-half years had helped address many of Sri Lanka’s longstanding structural vulnerabilities. “Tax revenues have increased dramatically and have almost doubled. The primary budget surplus has increased quite a lot, to over 5 percent in 2025,” he said.
The IMF Executive Board had approved the EFF arrangement for Sri Lanka on March 20, 2023, for an amount equivalent to about USD 3 billion. The facility was aimed at supporting Sri Lanka’s reform programme to restore macroeconomic stability by improving fiscal and debt sustainability, protecting vulnerable groups, safeguarding price and financial sector stability, rebuilding external buffers, strengthening governance, and reducing corruption vulnerabilities, while advancing growth-oriented structural reforms.
[with PTI inputs]
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