IMF praises Sri Lanka's steady economic reforms, investor focus

The International Monetary Fund (IMF) on Friday commended the Sri Lankan government, led by President Anura Kumara Dissanayake, for its continued commitment to the economic reforms initiated under the global lender's Extended Fund Facility (EFF).

The IMF highlighted the administration's policy consistency as a key factor in maintaining investor confidence and ensuring macroeconomic stability.

The new government's sustained commitment to programme objectives has enhanced confidence and ensures policy continuity. Going forward, sustaining reform momentum, including by reducing corruption vulnerabilities, is critical to safeguard the hard-won gains, durably restore macroeconomic and debt sustainability, and unlock robust and inclusive growth, the IMF said in a statement.

The statement was issued as the IMF and Sri Lanka reached an agreement in Washington on the fourth review of the $2.9 billion EFF programme, which was originally approved in March 2023 to assist Sri Lanka in navigating its worst economic crisis since independence.

Upon formal approval by the IMF Executive Board, Sri Lanka is set to receive the fifth tranche of approximately $344 million.

Sri Lanka's ambitious reform agenda continues to deliver commendable outcomes. The post-crisis growth rebound of 5 per cent in 2024 is remarkable. Revenue mobilisation reforms had improved revenue-to-GDP ratio to 13.5 per cent in 2024, from 8.2 per cent in 2022.

"Gross official reserves reached US$6.5 billion at end-March 2025 given sizeable foreign exchange purchases by the central bank. Substantial fiscal reforms have strengthened public finances. Sri Lanka's debt restructuring is nearly complete, the statement said.

President Dissanayake, who assumed office earlier this year after a sweeping election victory by the National People's Power (NPP), had been critical of the IMF-backed austerity measures under former president Ranil Wickremesinghe.

During the campaign, the NPP pledged to renegotiate aspects of the program, particularly those seen as disproportionately impacting low- and middle-income citizens. However, once in office, the new administration has largely upheld the reform agenda, signalling a pragmatic shift in approach to ensure continued financial support and economic stabilisation.

Sri Lanka sought IMF assistance in 2022 after defaulting on its external debt for the first time in its history, amid a severe balance of payments crisis, soaring inflation, and widespread shortages of essentials. The ongoing IMF programme is seen as vital to restoring credibility in international markets and laying the groundwork for sustainable, inclusive economic growth.