Monday Mar 09, 2026
Monday Mar 09, 2026
Monday, 9 March 2026 06:43 - - {{hitsCtrl.values.hits}}
Sri Lanka has told International Sovereign Bond (ISB) investors that the Government expects economic growth to stabilise at an average of 3.1% annually between 2027 and 2030 while maintaining a long-term real interest rate anchor of 2.5-2.6%, according to presentation documents released by the Finance Ministry last Friday.
The projections were outlined as part of the Government’s engagement with ISB holders following the sovereign debt restructuring and form part of the macroeconomic assumptions underpinning the International Monetary Fund (IMF)-supported recovery program.
The Daily FT earlier reported details of the investor conference call held on 11 February, where Treasury Secretary Dr. Harshana Suriyapperuma addressed ISB holders and reaffirmed the Government’s commitment to the IMF reform program (https://www.ft.lk/top-story/Sri-Lanka-tells-ISB-investors-Govt-locks-in-IMF-targets-reforms/26-788240, https://www.ft.lk/top-story/Sri-Lanka-tells-ISB-investors-Govt-locks-in-IMF-targets-reforms/26-788240).
According to the documents, Sri Lanka’s economy is expected to grow by 2.9% in 2026 before stabilising at around 3.1% annually between 2027 and 2030 based on estimates aligned with the IMF’s macroeconomic framework.
These growth projections are lower than the Central Bank of Sri Lanka’s (CBSL) medium-term forecast of 4.5-5% annual economic expansion.
Responding to investor questions on the interest rate outlook, the Treasury said that within the context of Sri Lanka’s economic recovery and obligations under the IMF’s Extended Fund Facility (EFF), the Government and the CBSL operate within a “flexible long-term real interest rate anchor of 2.5% to 2.6%.”
Investors also queried whether the Fifth and Sixth Reviews of the IMF program would be combined. The Finance Ministry said the Fifth Review, originally scheduled for completion in December 2025, had been delayed due to the extensive damage caused by Cyclone Ditwah in November and December 2025.
According to the Treasury, discussions on the Fifth Review are expected to advance significantly in March 2026. IMF Managing Director Dr. Kristalina Georgieva visited Colombo during the week of 16 February to discuss the next steps of the program with Sri Lankan authorities.
Officials also addressed questions regarding the interest rate applied to the IMF’s Rapid Financing Instrument (RFI), which Sri Lanka accessed to address urgent external financing pressures.
The Treasury said the RFI is a standard emergency instrument available to IMF member countries facing balance-of-payments shocks. The interest rate applicable at approval — around 3.27–3.28% — reflects the Special Drawing Rights (SDR) interest rate plus a fixed margin applied uniformly across members.
It added that this rate remains well below Sri Lanka’s market borrowing costs.
The Ministry further clarified that surcharges on IMF credit are not automatic and apply only if outstanding borrowing exceeds quota-based thresholds for a prolonged period.
With repayment terms of three to five years, the RFI is designed to provide rapid liquidity support while complementing domestic relief measures and stabilising the balance of payments.
During the investor call, Suriyapperuma reiterated that the Government remained committed to implementing the IMF program through 2027 without deviation.
He also signalled that key structural reforms, including the unbundling of the Ceylon Electricity Board, would proceed as planned and described it as a flagship reform under the program.
Suriyapperuma further noted that governance-linked bond coupon adjustments tied to revenue performance are expected to take effect from 2028 and said the economic impact of Cyclone Ditwah was not expected to have a material impact on sovereign bond yields.
He also told ISB investors that the Government intends to provide a further update on economic performance in about six months.
