An International Monetary Fund (IMF) mission led by Evan Papageorgiou concluded a visit to Sri Lanka, announcing a staff-level agreement on the Fifth Review of Sri Lanka’s Extended Fund Facility (EFF) arrangement. The EFF, approved by the IMF Executive Board in March 2023, totals SDR 2.3 billion (about US$3 billion) over four years.
The staff-level agreement remains subject to approval by the IMF Executive Board. This approval depends on Sri Lanka’s Parliament passing the 2026 Appropriation Bill in line with program parameters and the completion of a financing assurances review, which will confirm contributions from multilateral partners and assess progress in debt restructuring.
Upon completion of this review, Sri Lanka would gain access to SDR 254 million (about US$347 million), increasing total IMF disbursements under the arrangement to SDR 1,524 million (about US$2.04 billion).
Mr. Papageorgiou commented on the country’s recent economic developments: “Sri Lanka’s ambitious reform agenda continues to deliver commendable outcomes. The economy grew by 4.8 percent y/y in 2025H1 and we expect growth to remain solid in 2025. Inflation has returned to positive territory and in September prices rose by 1.5 percent y/y. Gross official reserves reached US$6.1 billion at end-September 2025. Fiscal performance in 2025H1 has been strong, primarily supported by taxes on motor vehicle imports. Debt restructuring is nearing completion.”
He noted that “Program performance is strong, underpinned by good fiscal revenue outcomes and improvements in external resilience. The reform momentum should be sustained to safeguard macroeconomic stability and enhance Sri Lanka’s resilience to shocks. This is particularly important given heightened downside risks to the economy from persistent trade policy uncertainty and geopolitical tensions.”
Mr. Papageorgiou also emphasized fiscal discipline: “The 2026 Budget should be in line with program parameters to continue building fiscal space on the back of strong revenue measures and prudent spending execution. This requires sustained efforts to improve tax compliance, broaden the tax base, and tackle revenue leakages by strengthening the tax exemption frameworks. Enhancing public financial management, avoiding the reemergence of expenditure arrears, and promoting high-quality and efficient public expenditure, including by addressing capital spending under-execution, will contribute to safeguarding fiscal discipline and transparency.”
He addressed energy pricing and state-owned enterprises: “At the same time, it is instrumental to maintain cost-recovery energy pricing, strengthen the governance of state-owned enterprises (SOEs), and resolve their legacy debts to ensure financial viability and minimize fiscal risks. Upcoming bills on public-private partnerships, SOEs, public procurement, and public asset management should be consistent with the Public Financial Management Act and best practices.”
On social protection, Mr. Papageorgiou stated: “Protecting the poor and vulnerable should remain a priority. There is scope to strengthen the design of the welfare benefit payment scheme to improve the targeting, adequacy, and coverage of social spending.”
He further commented on debt management: “Accelerating the finalization of bilateral debt agreements with the remaining official and commercial creditors is key to restoring debt sustainability and improving investor confidence. A swift operationalization of the Public Debt Management Office will be a key step towards prudent debt management practices.”
Monetary policy was also highlighted: “It is important for monetary policy to remain data-driven and to ensure price stability. Central bank independence should continue to be safeguarded, including by continuing to refrain from monetary financing of the budget. Efforts should continue to rebuild external buffers through reserve accumulation to adequate levels, while allowing for exchange rate flexibility. Resolving non-performing loans, strengthening governance and oversight of state-owned banks, and improving the insolvency and resolution frameworks are important to foster credit growth and safeguard financial sector stability.”
He concluded with remarks on governance reforms: “It is crucial to speed up the implementation of governance reforms outlined in the government’s action plan. Advancing procurement reforms, strengthening the AML/CFT framework, prioritizing anti-corruption measures in revenue administration, including digitalization, and implementation of electronic asset declarations will contribute to reducing corruption vulnerabilities. Recruitment at the Commission to Investigate Allegations of Bribery or Corruption (CIABOC) should be accelerated and CIABOC’s independence safeguarded in line with the Anti-Corruption Act. Structural reforms will be key to lifting Sri Lanka’s potential growth.”
During their visit, IMF staff met with President and Finance Minister Anura Kumara Dissanayake, Prime Minister Dr. Harini Amarasuriya, other senior government officials, representatives from the Central Bank of Sri Lanka, parliamentarians, private sector stakeholders, civil society organizations, and development partners.
“We would like to thank the authorities for the excellent collaboration during the mission, including while visiting the Central and Uva provinces. We reaffirm our commitment to support Sri Lanka achieve strong, sustainable growth,” Mr. Papageorgiou said.