The Executive Board of the International Monetary Fund (IMF) has completed the combined Fifth and Sixth Reviews of Sri Lanka’s Extended Fund Facility (EFF) programme, enabling the immediate disbursement of SDR508 million, equivalent to approximately US$695 million, to support the country’s ongoing economic reform agenda.

With the latest tranche, Sri Lanka has now received a total of SDR1.778 billion (around US$2.4 billion) under the 48-month EFF arrangement approved in March 2023, which carries an overall value of SDR2.286 billion, or about US$3 billion.

The IMF said Sri Lanka’s performance under the programme remained generally strong despite external shocks and difficult economic conditions. All end-December 2025 quantitative performance criteria had been met, while most structural benchmarks were either achieved or implemented with delays. Prior actions relating to restoring fuel and electricity cost-recovery pricing were also completed.

However, the IMF noted that Sri Lanka did not observe the continuous performance criteria related to avoiding new external payment arrears and refraining from imposing or intensifying import restrictions.

The Washington-based lender said the country’s reform efforts had helped preserve economic resilience in the face of fresh challenges, including the war in the Middle East and the aftermath of Cyclone Ditwah, both of which have increased downside risks to the economy.

According to the IMF, Sri Lanka’s economic growth is expected to slow to 3 percent in 2026 as higher global oil prices push up inflation and weaken the external sector. Tourism earnings are also likely to come under pressure due to global uncertainties linked to the conflict in the Middle East.

“Sri Lanka’s strong implementation under the EFF arrangement has continued despite challenging circumstances,” IMF Deputy Managing Director and Acting Chair Kenji Okamura said following the Executive Board discussion.

He noted that gains from the reform programme had created policy space for the government to respond to both Cyclone Ditwah and global economic disruptions.

The IMF endorsed the government’s decision to ease fiscal policy temporarily in 2026 to provide relief measures and fund recovery and reconstruction efforts following the cyclone. Nevertheless, the authorities have committed to restoring the primary balance target of 2.3 percent of GDP from 2027 onwards and maintaining expenditure discipline.

The IMF also stressed the importance of accelerating reforms in public financial management, investment management and the electricity sector, while highlighting the need for stronger revenue mobilization through a medium-term revenue strategy.

Debt restructuring efforts are nearing completion, although the IMF cautioned that debt sustainability risks remain elevated.

The Fund further emphasized that monetary policy should continue focusing on price stability, while greater exchange rate flexibility and the gradual removal of balance-of-payments restrictions would be essential to rebuilding external buffers and strengthening economic resilience.

The IMF said well-calibrated structural reforms and renewed public infrastructure investments would be critical to improving the investment climate and boosting Sri Lanka’s long-term growth potential.