IMF Confirms Positive Sri Lanka Outlook, Warns Rising Risks

The International Monetary Fund (IMF) has affirmed a positive economic outlook for Sri Lanka amid its ongoing recovery under the IMF-supported Extended Fund Facility program, noting improvements such as strengthened economic growth, low inflation, accumulating reserves, and improved fiscal revenues. However, the IMF cautioned that downside risks have increased due to global trade policy uncertainties and other potential shocks, urging Sri Lankan authorities to maintain strict compliance with fiscal reforms and collaborate closely with the IMF to assess and respond to any emerging economic challenges. The debt restructuring process is nearing completion, with the IMF emphasizing the priority of finalizing agreements with remaining official and commercial creditors. Despite some implementation risks and a recent inadvertent underreporting of government expenditure arrears data, the IMF approved a waiver for non-observance and stressed the importance of sustained revenue mobilization and enhanced public financial management to restore fiscal sustainability. The IMF has disbursed SDR 1.27 billion so far, supporting Sri Lanka’s efforts to restore macroeconomic stability, protect vulnerable populations, safeguard price and financial stability, rebuild external buffers, strengthen governance, and promote growth-oriented structural reforms. Overall, the IMF encourages Sri Lanka to stay the course amid global uncertainties to ensure durable economic recovery.