Sustained adherence to the reform agenda has supported a strong economic recovery, price stability, substantial revenue-based fiscal consolidation, and progress in rebuilding foreign exchange reserves, but the economy remains vulnerable, and GDP has not yet returned to its pre-crisis level, an IMF official said.

Kenji Okamura, Deputy Managing Director and Acting Chair, made the remarks in a statement issued last Friday.

Sri Lanka was recently hit by a catastrophic cyclone, which claimed more than 600 lives and affected millions more. Flooding and landslides displaced over 100,000 people, destroyed critical infrastructure, and devastated livelihoods across the country, he noted.

The disaster has created urgent humanitarian and reconstruction needs, generating significant fiscal pressures and balance-of-payments challenges. Emergency financial support provided by the IMF under the Rapid Financing Instrument (RFI) will help address these pressures.

Okamura said the government responded swiftly with a package of relief measures, supported by strong fiscal overperformance in 2025. He added that the Central Bank of Sri Lanka stands ready to provide liquidity support to the financial system if needed.

While acknowledging that recovery and reconstruction needs will be substantial, the authorities remain committed to maintaining fiscal prudence to safeguard fiscal and debt sustainability. All emergency spending will be executed in full compliance with the Public Financial Management Act and supported by enhanced monitoring and regular public reporting, in line with transparency and accountability standards. The Central Bank will continue to refrain from monetary financing of the budget.

He emphasised that the cyclone struck as Sri Lanka is emerging from a deep economic crisis, and the IMF-supported reform programme under the Extended Fund Facility (EFF) is beginning to bear fruit.

Okamura concluded that the authorities and the IMF team maintain close engagement and will resume discussions at the earliest possible opportunity. The IMF stands with the people of Sri Lanka during this difficult time and will continue to support the country’s recovery and reconstruction efforts.