Sri Lanka’s IMF Program: Progress, Challenges, and the Road Ahead

a one billion dollar bill with the words one billion dollars printed on it

International Monetary Fund (IMF) is currently supporting Sri Lanka under a 48-month Extended Fund Facility (EFF) arrangement, which was approved on March 20, 2023. IMF+3IMF+3IMF+3

Here are key details of the programme:

  • The approved amount is SDR 2.286 billion (roughly US$3 billion) for the full arrangement. IMF+2IMF+2
  • The programme’s main objectives include:
    • Restoring fiscal and debt sustainability. IMF+2IMF+2
    • Safeguarding price stability and rebuilding external reserves / buffers. IMF+2IMF+2
    • Strengthening governance, reducing corruption vulnerabilities, and advancing structural reforms aimed at growth. IMF+1
    • Protecting vulnerable groups while implementing fiscal reforms. IMF+1
  • Progress:
    • As of July 1, 2025 the IMF Executive Board completed the fourth review of the arrangement, enabling Sri Lanka to draw further financing. IMF+1
    • According to an IMF mission in July 2025, the economy is showing positive signs: growth rebounding, inflation under control, reserves improving. IMF+1
  • Conditions and caveats remain:
    • There are structural benchmarks still to be fully met (for example, in electricity cost-recovery pricing) as part of the review conditions. IMF+1
    • The global environment and trade policy risks are noted as significant downside risks to the programme’s success. IMF+1

In summary: Sri Lanka is in an ongoing IMF-supported reform programme under a 4-year EFF, started in March 2023, aimed at stabilising the economy, restructuring debt, reforming governance and public finances, while protecting vulnerable segments.

Here is a summary of what the International Monetary Fund (IMF) indicated in its Staff Report for the Fourth Review of the EFF-arrangement with Sri Lanka (dated 3 July 2025) including which benchmarks were met and which remain outstanding. IMF


✅ Benchmarks met (or implemented)

From the report and press release:

  • All quantitative performance criteria for end-March 2025 were met except for the stock of expenditure arrears. IMF+2Central Bank of Sri Lanka+2
  • The two prior actions for the Fourth Review were met:
    1. Restoration of cost-recovery electricity pricing for the rest of 2025. IMF+1
    2. Operationalisation of the automatic tariff adjustment mechanism for electricity. IMF
  • All structural benchmarks due by end-May 2025 were either met or implemented with a delay. IMF eLibrary+1
  • Significant progress: debt restructuring is nearing completion; reserve accumulation; revenue mobilisation improving. IMF+1

⚠️ Benchmarks outstanding / issues

Despite the strong progress, the report flagged some remaining weaknesses:

  • The continuous structural benchmark on cost-recovery electricity pricing (i.e., maintaining it over time) remains not fully met (i.e., it was met for the prior action but the continuous element remains a risk). Central Bank of Sri Lanka+1
  • The stock of expenditure arrears was not met (i.e., the target for the size of arrears was breached) and the IMF granted a waiver for this non-observance. IMF+1
  • On governance/structural reforms: while many benchmarks were met, the authorities still need to deepen reforms such as: strengthening tax exemption frameworks, improving public financial management (PFM) and arrears reporting systems, enhancing SOE (state-owned enterprise) governance, and implementing asset-declaration systems. IMF
  • Inflation in 2025 Q2 fell below the lower band of the monetary policy consultation clause (i.e., inflation was too low, due to energy price developments) signalling unusual conditions and risk for policy calibration. IMF+1
  • Carry-over risks: global trade policy uncertainty, external shocks, execution risk in capital spending, and ensuring momentum in structural reforms. IMF

🔍 Summary table

Type of benchmarkStatusNotes
Quantitative criteria (end-March 2025)Met except expenditure arrearsArrears target breached → waiver given
Prior actions for 4th reviewMetElectricity pricing & tariff adjustment
Structural benchmarks (due end-May)Met or implemented with delayOutstanding: continuous benchmarks & deeper reforms
Continuous obligationsNot fully met / still a riskCost recovery pricing, governance, PFM

Sri Lanka: Selected Economic Indicators (2024–2027)

Sources: Sri Lankan authorities and IMF staff estimates

📈 GDP and Inflation (percent)

  2024
(Est.)
2025 2026 2027
Real GDP Growth 5.0 3.5 3.1 3.1
Inflation (avg, CPI) 1.2 3.3 5.2 5.0
Inflation (end-period) -1.5 8.9 5.2 5.0
GDP Deflator 3.8 3.6 5.3 5.1
Nominal GDP Growth 9.0 7.1 8.5 8.4

💰 Savings and Investment (% of GDP)

  2024 2025 2026 2027
National Savings 25.2 21.8 22.2 22.9
 Government -3.2 -2.0 -0.8 -0.1
 Private 28.4 23.8 23.0 23.0
National Investment 27.0 21.8 22.1 22.5
Savings-Investment Balance -1.8 0.0 0.1 0.4

🏛️ Public Finance (% of GDP)

  2024 2025 2026 2027
Revenue & Grants 13.7 15.0 15.2 15.3
Expenditure 19.3 20.5 19.7 19.2
Primary Balance 2.2 2.3 2.3 2.3
Central Gov. Balance -5.6 -5.4 -4.5 -3.9
Public Debt 105.2 109.6 107.4 103.6

🏦 Money and Credit (% change, end-period)

  2024 2025 2026 2027
Reserve Money 15.8 6.5 8.5 8.4
Broad Money 8.6 6.5 8.5 8.4
Credit to Private Sector 10.7 9.4 9.2 9.3

🌏 External Sector & Reserves

  2024 2025 2026 2027
Exports (US$ mn) 12,772 12,880 13,490 14,194
Imports (US$ mn) -18,828 -21,363 -22,447 -23,578
Current Account (% GDP) 1.8 0.0 -0.1 -0.4
Gross Reserves (US$ mn) 6,122 7,255 9,273 12,974
Reserves / Imports (months) 3.0 3.3 4.0 5.4
External Debt (% GDP) 54.4 55.1 58.6 59.4

📊 Memorandum items: Nominal GDP (Rs bn): 29,899 → 37,664 (2024–2027) | Exchange rate (avg): Rs 302/USD (2024)

1/ Colombo CPI. 2/ Includes CBSL external liabilities. 3/ PBOC swap excluded until GIR > 3 months of imports.

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