Despite a post-crisis rebound, the IMF projects slower growth ahead for Sri Lanka, citing cyclone damage, fiscal pressures and a postponed reform review that will test the country’s recovery path.
Sri Lanka’s economic growth is expected to slow over the next few years, according to a statement issued by the Executive Board of the International Monetary Fund following the approval of emergency financial assistance amounting to US $206 million.
Based on the economic indicators outlined in the report, Sri Lanka’s gross domestic product expanded by 5.0 percent in 2024, reflecting a stronger-than-expected rebound after the crisis. However, growth is projected to ease to 4.2 percent in 2025, signaling a gradual loss of momentum as structural challenges persist.
The IMF forecasts that economic growth will slow further to 2.9 percent in 2026, highlighting concerns over vulnerability to external shocks, constrained fiscal space and recovery-related pressures. A modest improvement is expected thereafter, with growth projected to edge up to 3.1 percent in 2027.
The Fund noted that Sri Lanka’s economy was severely affected by the cyclone that struck the country on November 28, causing widespread damage. The destruction of infrastructure and the loss of livelihoods have placed significant financial pressure on the state at a time when recovery remains fragile.
Although the economy is showing signs of stabilization, GDP has not yet returned to pre-crisis levels, IMF Deputy Managing Director Kenji Okamura emphasized, underscoring the need for continued reform and resilience-building measures.
Due to the ongoing emergency, the Fifth Review of Sri Lanka’s Economic Reform Program has been postponed. The IMF stated that discussions on the Fifth Review are expected to resume in early 2026, once a clearer assessment of the economic impact of the disaster is completed.
The statement added that the Government of Sri Lanka and the Central Bank of Sri Lanka remain committed to stabilizing the economy while maintaining fiscal discipline. The IMF reaffirmed that it will continue to support Sri Lanka through this challenging period.
