Friday Sep 25, 2026
Friday Sep 25, 2026
Thursday, 24 September 2026 00:00 - - {{hitsCtrl.values.hits}}
IMF Mission Chief for Sri Lanka Evan Papageorgiou gestures during the media briefing yesterday – Pic by Upul Abayasekara
The International Monetary Fund (IMF) yesterday acknowledged the Sri Lankan economy’s resilience, judging by 11 consecutive quarters of growth, but warned risk remains tilted to the downside due to external factors.
“Sri Lanka’s economy has proved remarkably resilient to successive shocks. Economic activity expanded by 4.2% in 2Q2026, marking 11 consecutive quarters of strong growth. However, Sri Lanka continues to face downside risks from uncertainty over the duration and intensity of the Middle East war, global trade policy, and the impact of El Niño,” IMF Mission Chief for Sri Lanka Evan Papageorgiou told journalists.
“Safeguarding macroeconomic stability in a shock-prone environment requires unwavering commitment to prudent policies and reforms to rebuild fiscal and external buffers, maintain price stability, and advance the governance agenda while strengthening social safety nets to protect the most vulnerable,” he said following the conclusion of the IMF’s latest mission in connection to the Seventh Review of the $ 3 billion Extended Fund Facility (EFF) program.
The team, led by Papageorgiou, visited Sri Lanka from 10 to 23 September. It discussed recent macroeconomic developments and progress in implementing policies under the EFF, alongside policy recommendations under the 2026 Article IV Consultation, the IMF’s regular health check of member economies.
“Discussions are continuing with the goal of reaching a staff-level agreement in the near term to pave the way for timely completion of the Seventh Review,” Papageorgiou said during the media briefing along with IMF Resident Representative for Sri Lanka Martha Tesfaye Woldemichael.
In a statement, the IMF said headline inflation rose to 8% in August due to the global oil price shock; expectations are broadly anchored. Gross official reserves have increased, reaching $ 6.9 billion at end-August 2026. Banks remain well capitalised and profitable. Fiscal outturn in the first half of 2026 was strong and debt restructuring is largely completed.
The IMF stressed that it would be critical to develop and implement a medium-term revenue strategy to sustain revenue mobilisation while improving the efficiency and fairness of the tax system. Steadfast efforts are needed to broaden the tax base and rationalise tax exemptions and incentives. Strengthening revenue administration would further improve tax compliance and support durable revenue gains. Upholding cost-recovery energy pricing will help minimise fiscal risks arising from State-owned enterprises. It is also important to address bottlenecks to capital spending execution, including to accelerate Cyclone Ditwah-related recovery and reconstruction.
Monetary policy should stand ready to address inflationary pressures and ensure price stability within the medium-term period in line with the flexible inflation targeting framework. Greater exchange rate flexibility is key to absorbing shocks and supporting reserve accumulation.
The IMF also said preserving the integrity of the anti-corruption legislative framework is critical to enhance public trust. Select clauses from the recently tabled amendments could weaken transparency and accountability.
Shifting from stabilisation to transformation requires sustained momentum on structural reforms to foster an enabling business environment and attract investment, including by liberalising trade, modernising business and labour regulations, broadening access to finance, and advancing digitalisation. Ultimately, establishing a track record of sound policy and reform implementation will help strengthen resilience, durably restore confidence, and lift living standards through strong and inclusive growth as its research suggests.
The IMF team visited Jaffna and learned first-hand about the Northern Province’s economic potential. Discussions with the private sector and civil society highlighted opportunities to unlock growth and create jobs through investments in connectivity, skills, and sectors such as agriculture, fisheries, tourism, and renewable energy, while strengthening social protection so that the benefits of Sri Lanka’s economic transformation are shared more broadly.
The IMF team held meetings with President and Finance Minister Anura Kumara Dissanayake, Prime Minister Dr. Harini Amarasuriya, Labour Minister and Finance and Planning Deputy Minister Dr. Anil Jayantha Fernando, Central Bank of Sri Lanka (CBSL) Governor Dr. Nandalal Weerasinghe, Treasury Secretary Dr. Harshana Suriyapperuma, Senior Economic Adviser to the President Duminda Hulangamuwa, Chief Adviser to the President on Digital Economy Dr. Hans Wijayasuriya, Northern Province Governor Nagalingam Vethanayahan, and other senior Government and CBSL officials. The IMF team also met with Parliamentarians, representatives from the private sector, civil society organisations, and development partners.
“We would like to thank the authorities for the excellent collaboration during the mission. Discussions are continuing with the goal of reaching a staff-level agreement in the near term to pave the way for timely completion of the Seventh Review. We reaffirm our commitment to continue supporting Sri Lanka.”
