Discussions between the International Monetary Fund (IMF) and Sri Lankan authorities will continue in the near term with the aim of reaching agreement on the parameters and policies required to conclude the Seventh Review of Sri Lanka’s Extended Fund Facility (EFF) programme, the IMF said at the conclusion of its latest mission to the country.
In a statement issued at the end of the mission, led by IMF Mission Chief Evan Papageorgiou, the IMF said staff and Sri Lankan authorities had held productive discussions relating to the Seventh Review of the EFF arrangement and the 2026 Article IV Consultation.
The IMF noted that Sri Lanka’s economy has continued to demonstrate resilience despite facing successive shocks. Economic activity expanded by 4.2 per cent in the second quarter of 2026, marking the eleventh consecutive quarter of strong growth, while gross official reserves increased to US$ 6.9 billion by the end of August 2026. The IMF also said banks remain well capitalised and profitable, fiscal performance during the first half of 2026 was strong and the country’s debt restructuring process is largely complete.
However, the IMF cautioned that downside risks remain, citing uncertainty surrounding the duration and intensity of the conflict in the Middle East, global trade policy developments and the impact of El Niño.
The IMF stressed that maintaining macroeconomic stability in a shock-prone environment would require unwavering commitment to prudent policies and reforms. It identified the development and implementation of a medium-term revenue strategy as a key priority, alongside efforts to broaden the tax base, rationalise exemptions and incentives, and strengthen revenue administration to improve compliance and secure durable revenue gains.
The Fund also underscored the importance of maintaining cost-recovery energy pricing to minimise fiscal risks arising from state-owned enterprises and called for action to address bottlenecks affecting capital expenditure, including projects linked to recovery and reconstruction efforts following Cyclone Ditwah.
On monetary policy, the IMF said authorities should remain prepared to respond to inflationary pressures while maintaining price stability under the flexible inflation-targeting framework. It added that greater exchange rate flexibility would help absorb shocks and support reserve accumulation.
The IMF further stated that it would be prudent for Sri Lanka to maintain its existing 5% inflation target and current accountability band during the first statutory review, arguing that the target provides the flexibility needed in an environment of high food and energy price volatility.
The statement also highlighted governance and anti-corruption reforms, with the IMF stressing that preserving the integrity of the anti-corruption legislative framework is essential to enhancing public trust. It warned that selected clauses in recently proposed amendments could weaken transparency and accountability.
The IMF said Sri Lanka must now move from economic stabilisation to economic transformation through sustained structural reforms aimed at creating a more conducive business environment and attracting investment. Recommended measures include trade liberalisation, modernisation of business and labour regulations, broader access to finance and accelerated digitalisation.
The mission also visited Jaffna, where discussions with private sector representatives and civil society groups focused on the Northern Province’s economic potential and opportunities for growth through investment in connectivity, skills development, agriculture, fisheries, tourism and renewable energy.
During the visit, the IMF delegation met President and Finance Minister Anura Kumara Dissanayake, Prime Minister Harini Amarasuriya, senior government officials, Central Bank representatives, parliamentarians, private sector representatives, civil society organisations and development partners.
The IMF reaffirmed its commitment to supporting Sri Lanka and said discussions would continue with the goal of reaching a staff-level agreement that would pave the way for the timely completion of the Seventh Review.
Full statement : https://www.imf.org/en/news/articles/2026/09/23/pr26301-sri-lanka-imf-staff-team-concludes-visit (Newswire)
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