IMF Urges Sri Lanka to Continue Economic Reforms Amid Global Challenges As Mission Concludes Sri Lanka Visit

COLOMBO (News 1st): An International Monetary Fund (IMF) team led by the Mission Chief for Sri Lanka at the International Monetary Fund, Evan Papageorgiou visited Colombo from June 24 to 30, to take stock of recent macroeconomic developments and discuss the authorities’ progress in implementing their economic reform program supported by the IMF’s Extended Fund Facility (EFF) arrangement. 

Issuing a statement at the conclusion of the visit, Mission Chief for Sri Lanka at the International Monetary Fund, Evan Papageorgiou noted that Sri Lanka’s economy has come under pressure from rising global tensions, including the Middle East conflict. It said inflation has increased, moving from 1.6 percent in February to 5.5 percent in May, driven largely by higher energy prices.

The Fund also pointed to a slowdown in tourism growth and a weaker pace of foreign reserve accumulation during the period. In response, the Central Bank of Sri Lanka raised its policy interest rate by 100 basis points and introduced macroprudential measures to stabilize the economy.

Meanwhile, the government implemented a temporary relief package, including subsidies on fuel, electricity, and fertilizer, along with targeted cash transfers to vulnerable groups.

The IMF said that while global commodity prices have recently eased, uncertainty remains high. It stressed that Sri Lanka must stay the course on its reform programme to ensure long-term fiscal and external stability.

The statement emphasized the need to restore the primary balance target of 2.3 percent of GDP by 2027, strengthen tax compliance, broaden the tax base, and improve public financial management.

It also called for faster reforms in state-owned enterprises, continued cost-reflective energy pricing, and better-targeted social safety nets.

The statement also highlighted that Sri Lanka’s program performance will be formally assessed in the context of the Seventh Review of the EFF. The dates of the mission will be announced in due time.