IMF Approves $350 Million Tranche for Sri Lanka’s Recovery
The International Monetary Fund (IMF) has approved the release of $350 million to Sri Lanka following the successful completion of the fourth review under its $2.9 billion Extended Fund Facility (EFF). This latest disbursement brings the total assistance received by Sri Lanka under the program to approximately $1.74 billion, marking a crucial step in the country’s ongoing efforts to recover from its severe economic crisis.
IMF Aid
The approved amount, equivalent to SDR 254 million, will be used to bolster Sri Lanka’s foreign reserves and support fiscal and structural reforms. The IMF’s decision follows a comprehensive review of the country’s economic performance and commitment to the reform agenda laid out under the EFF program, which was initiated in March 2023.
Sri Lanka had previously faced one of its worst financial crises, grappling with depleted foreign reserves, soaring inflation, and widespread public unrest. The IMF facility is intended to stabilize the economy, restore debt sustainability, and support inclusive growth.
Reform Progress Under EFF
The fourth review highlighted key achievements including improved tax collection, efforts to restructure external debt, and progress on energy sector reforms. The IMF acknowledged that Sri Lanka had met critical quantitative targets and structural benchmarks related to fiscal management and public sector transparency.
The country has undertaken unpopular but necessary reforms, such as aligning fuel and electricity prices with costs, implementing progressive tax policies, and improving state-owned enterprise efficiency. The IMF praised the government’s focus on social safety nets to protect the most vulnerable during this period of adjustment.
Economic Outlook and Debt Restructuring
The IMF forecasted that Sri Lanka’s economy will grow by around 3 to 3.5% in 2025, following a recovery of 5% in 2024. Inflation has come down significantly from crisis-era highs, and the balance of payments situation has improved. The successful review is also expected to facilitate Sri Lanka’s ongoing talks with bilateral and private creditors to finalize a comprehensive debt restructuring deal.
Officials emphasized that while the progress is encouraging, continued focus on governance, anti-corruption measures, and maintaining reform momentum will be essential to sustaining the recovery and restoring investor confidence.
