IMF trims SL’s 2026 growth forecast to 3.1% as rebound normalises

Thursday, 30 October 2025 05:53 - - {{hitsCtrl.values.hits}}

The International Monetary Fund (IMF) has revised Sri Lanka’s 2026 growth forecast down to 3.1% from 3.5%, citing the economy’s return to its long-term trend following a sharp post-crisis rebound.

IMF Asia and Pacific Department Deputy Director Thomas Helbling said the downgrade does not indicate renewed weakness but rather a normalisation after an exceptional recovery.

“Sri Lanka had a deep recession in 2022-2023 during the balance of payments crisis,” he said. “With reforms supported by the IMF, there was a strong rebound—growth was about 5% last year and 4.8% in the first half of this year.

Some of that rebound was temporary, reflecting normalisation in activity. We now see the economy moving back to its trend growth of 3.1%, and that return is happening a bit sooner than expected.”

Helbling said the IMF staff mission that visited Sri Lanka earlier this month to conduct the Fifth Review of the Extended Fund Facility (EFF) reached a staff-level agreement around 9 or 10 October. “That signals that the IMF has been satisfied,” he noted, adding that the Government has continued to meet key performance criteria.

He highlighted progress on electricity pricing reforms—a continuous structural benchmark under the EFF arrangement, designed to reduce fiscal risks from State-owned utilities.

“The principle of cost recovery is a core principle enshrined in the program reforms, and the Government has continued to meet those benchmarks,” Helbling said, noting that the early October assessment was positive.

On fiscal projections, Helbling said the IMF’s focus remains on the current and following year. “Reforms are progressing. It is important for Sri Lanka to stay the course and complete its own home-grown reform program to bring the economy back on track and fully stabilise the economy,” he said.

He added that concerns about fiscal outcomes beyond 2028 should be kept in perspective, emphasising that consistent implementation of the reform program will be key to sustaining macroeconomic stability and growth.