An International Monetary Fund (IMF) mission has reached a staff-level agreement with Sri Lankan authorities on the combined fifth and sixth reviews of the country’s four-year Extended Fund Facility (EFF) programme, potentially unlocking about US$700 million in additional financing once approved by the IMF Executive Board.

The IMF mission, led by Evan Papageorgiou, visited Sri Lanka from March 26 to April 9 to assess macroeconomic developments and progress in implementing reforms under the US$3 billion programme approved in March 2023.

Under the agreement, Sri Lanka would gain access to about SDR 508 million (approximately US$700 million) following Executive Board approval, raising total disbursements under the programme to about SDR 1.78 billion (roughly US$2.4 billion).

However, the IMF said Board approval would depend on the restoration of cost-recovery pricing for electricity and fuel while protecting vulnerable groups, as well as the completion of a financing assurances review to confirm contributions from multilateral partners and progress in debt restructuring.

The IMF noted that Sri Lanka’s reform programme has begun delivering positive results. The economy expanded by around 5 percent year-on-year in 2025, inflation rebounded to 2.2 percent in March 2026 after a period of deflation, and gross official reserves reached US$7 billion by the end of March.

Fiscal performance in 2025 was described as strong, supported largely by tax revenues from motor vehicle imports. Debt restructuring efforts are also nearing completion, with progress including the completion of the debt exchange of SriLankan Airlines and continued negotiations with bilateral creditors.

Despite these gains, the IMF cautioned that Sri Lanka remains vulnerable to external shocks, particularly the ongoing Middle East conflict, which has pushed up energy prices, disrupted tourism through aviation routes, and affected Sri Lankan workers in the region.

The IMF also highlighted the economic impact of Cyclone Ditwah, which has created additional infrastructure and fiscal pressures.

To maintain macroeconomic stability, the IMF urged authorities to continue strengthening fiscal discipline through improved tax compliance, broadening the tax base, and enhancing public financial management. It emphasized the need to maintain cost-recovery pricing in the energy sector while ensuring targeted support for vulnerable households.

The Fund also stressed the importance of maintaining an independent central bank, rebuilding foreign exchange reserves, and allowing exchange rate flexibility amid global uncertainty. Addressing non-performing loans and strengthening oversight of smaller licensed finance companies were also highlighted as priorities for safeguarding financial stability.

Governance reforms were also noted as a key component of the programme. The IMF welcomed the government’s 2026 action plan on governance reforms and stressed the need to ensure the independence of the Commission to Investigate Allegations of Bribery or Corruption (CIABOC), strengthen fiscal governance laws, and improve transparency in public procurement and state-owned enterprises.

The IMF mission held discussions with senior Sri Lankan officials, including President and Finance Minister Anura Kumara Dissanayake, Deputy Finance Minister Anil Jayantha Fernando, and Central Bank Governor P. Nandalal Weerasinghe, along with other policymakers, private sector representatives, and development partners.

The IMF reaffirmed its commitment to supporting Sri Lanka’s economic recovery, emphasizing that continued reforms will be crucial to securing macroeconomic stability and sustaining inclusive growth.