An International Monetary Fund (IMF) mission team, led by Mission Chief Evan Papageorgiou, visited Colombo from 21th to 25th of July 2025, to assess Sri Lanka’s recent macroeconomic developments and progress under the IMF-supported Extended Fund Facility (EFF) program.
Following the visit, Mr. Papageorgiou issued a statement commending Sri Lanka’s ongoing economic reform efforts, noting that real GDP grew by 4.8% in the first quarter of 2025—surpassing expectations.
Headline inflation stood at -1.1% in the second quarter of 2025, indicating a gradual return to target levels. Gross international reserves reached USD 6 billion by end-June, while revenue collection improved, particularly from VAT and taxes on imported vehicles.
Despite this positive outlook, the IMF warned of growing risks from global trade tensions, potential high tariffs on Sri Lankan exports, and continued policy uncertainty—underscoring the need to sustain reform momentum and rebuild fiscal and external buffers.
To meet the medium-term primary balance target of 2.3% of GDP and ensure debt sustainability, the 2026 budget must include strong revenue measures and disciplined spending aligned with IMF program goals.
The IMF urged the government to strengthen tax compliance, broaden the tax base, reform public financial management, and maintain cost-reflective energy pricing to reduce fiscal risks.
The statement emphasized that protecting vulnerable populations through targeted and adequate social support remains a critical priority.
The IMF noted that Sri Lanka’s debt restructuring process is nearly complete and encouraged swift finalization of agreements with remaining official and private creditors to restore debt sustainability.
The Fund also stressed the importance of prudent monetary policy, preserving central bank independence, enhancing reserve buffers, and maintaining exchange rate flexibility.
Financial sector reforms, including resolving non-performing loans, improving oversight of state-owned banks, and modernizing insolvency frameworks, are vital to support credit growth and private sector development.
Structural reforms in trade liberalization, investment promotion, female labor force participation, and climate resilience will be key to raising Sri Lanka’s long-term growth potential.
Governance reforms to reduce corruption vulnerabilities remain a core priority, the IMF stated, adding that the progress made will be formally assessed during the upcoming Fifth Review of the EFF.
During the mission, the IMF team met with President and Finance Minister Anura Kumara Dissanayake, senior officials from the Central Bank and Treasury, key advisors, private sector representatives, civil society, and development partners.
The IMF expressed appreciation for the government’s cooperation and reaffirmed its commitment to supporting Sri Lanka through this crucial phase.
