Sri Lanka moves closer to unlocking critical IMF funding as a staff-level agreement signals progress in economic reforms, debt restructuring, and fiscal discipline, even as global risks and domestic challenges continue to test the country’s fragile recovery.
The International Monetary Fund and Sri Lankan authorities have reached a staff level agreement on economic policies to conclude the combined fifth and sixth reviews of Sri Lanka’s reform program supported under the Extended Fund Facility EFF, according to an official IMF statement.
Once this review receives formal approval from the IMF Executive Board, Sri Lanka will gain access to approximately 700 million US dollars in financing, providing a significant boost to the country’s ongoing economic recovery efforts, the IMF confirmed on Thursday April 9.
The announcement follows a visit by an IMF mission team led by Mission Chief Evan Papageorgiou, who was in Sri Lanka from March 26 to April 9 2026. The mission reviewed macroeconomic developments and assessed the country’s progress in implementing economic reforms and financial policy measures under the EFF arrangement.
Papageorgiou stated that IMF staff and Sri Lankan authorities have successfully reached a staff level agreement on the combined fifth and sixth reviews under the four year Extended Fund Facility program, marking another step forward in Sri Lanka’s reform journey.
He recalled that the EFF arrangement was originally approved by the IMF Executive Board on March 20 2023 for a total amount of SDR 2.3 billion, which is approximately 3 billion US dollars, aimed at stabilizing the Sri Lankan economy and supporting structural reforms.
However, the agreement remains subject to final approval by the IMF Executive Board. This approval will depend on key conditions including the restoration of cost recovery pricing for electricity and fuel while ensuring protection for vulnerable communities, as well as the completion of financing assurances reviews and sufficient progress in debt restructuring.
Upon completion of the review process, Sri Lanka is expected to receive SDR 508 million, equivalent to around 700 million US dollars, bringing the total IMF financial support disbursed under the EFF program to SDR 1,778 million or approximately 2.4 billion US dollars.
Papageorgiou noted that Sri Lanka’s ambitious reform agenda is beginning to deliver commendable results. He highlighted that debt restructuring efforts are nearing completion, including the successful debt exchange of SriLankan Airlines and continued progress in finalizing remaining bilateral agreements.
At the same time, he warned that Sri Lanka remains significantly exposed to external shocks, particularly the ongoing conflict in the Middle East, which has increased global energy prices, disrupted a key aviation hub for tourism, and affected Sri Lankan workers in the region.
Despite these challenges, authorities have taken steps to stabilize economic activity by ensuring adequate fuel supplies for both households and industries. However, the country must also address infrastructure damage and spending pressures arising from Cyclone Ditwah.
Papageorgiou emphasized that downside risks remain elevated due to climate related disasters, ongoing global trade uncertainty, and geopolitical tensions. These risks underline the urgency of accelerating reforms to maintain macroeconomic stability, strengthen resilience, and keep the economy on a path toward recovery and inclusive growth.
He stressed the importance of building fiscal space through strong revenue measures and disciplined public spending. This includes improving tax compliance, broadening the tax base, reducing revenue leakages, and strengthening public financial management systems.
The IMF also highlighted the need to maintain cost recovery based pricing for fuel and electricity while protecting the most vulnerable segments of society. Continued vigilance is required to manage fiscal risks and uphold fiscal discipline.
Protecting vulnerable populations remains a central priority of the IMF program. The Fund reiterated the need to strengthen social safety nets by improving their targeting, adequacy, coverage, and ability to respond to economic shocks.
Rebuilding foreign exchange reserves while maintaining exchange rate flexibility is also seen as critical in the current global environment. Addressing non performing loans, supporting healthy credit growth, and resolving weaknesses in smaller finance companies will help preserve financial system stability.
The IMF welcomed the release of Sri Lanka’s 2026 government action plan on governance reforms, noting that effective implementation will strengthen anti corruption efforts and support sustainable economic growth.
It emphasized the importance of maintaining the independence of the Commission to Investigate Allegations of Bribery or Corruption CIABOC, ensuring transparency through beneficial ownership registries, and improving fiscal governance through stronger legal frameworks for public private partnerships, state owned enterprises, procurement systems, and asset management.
Ultimately, the IMF stated that unlocking strong and sustainable growth for Sri Lanka will require staying committed to reforms. This includes advancing trade liberalization, accelerating digital transformation, simplifying business regulations, and modernizing labor laws to reduce structural rigidities and enhance competitiveness.
