IMF Staff Concludes Visit to Sri Lanka
IMF News, June 30, 2026
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Bibliographic details
- Published: June 30, 2026
Mission background
- Press Release No. 26/229
- Mission led by Mr. Evan Papageorgiou.
- Visit dates: June 24 to 30.
- Purpose: take stock of recent macroeconomic developments and discuss progress in implementing the economic reform program supported by the IMF’s Extended Fund Facility (EFF) arrangement.
- Meetings held with: His Excellency the President and Finance Minister Anura Kumara Dissanayake; the Honorable Prime Minister Dr. Harini Amarasuriya; Honorable Labor Minister and Deputy Minister of Finance and Planning Prof. Anil Jayantha Fernando; Central Bank of Sri Lanka Governor Dr. P. Nandalal Weerasinghe; Secretary to the Treasury Dr. Harshana Suriyapperuma; Senior Economic Advisor to the President Mr. Duminda Hulangamuwa; Chief Advisor to the President on Digital Economy Dr. Hans Wijayasuriya; other senior government and CBSL officials; private sector, civil society organizations, and development partners.
Recent macroeconomic developments and impacts
- The Middle East war has weighed on Sri Lanka’s economy.
- Headline inflation rose from 1.6 percent y/y in February 2026 to 5.5 percent y/y in May following energy price increases.
- Tourist arrivals growth softened.
- Gross international reserves accumulation decelerated.
- Central Bank response: a 100-basis point policy rate hike and deployment of macroprudential measures.
- Government response: a temporary, on-budget, relief package comprising fuel, electricity, and fertilizer subsidies, as well as cash transfers to the most vulnerable households.
- Recent decline in global commodity prices offers some relief from external pressures, though uncertainty remains high.
Fiscal policy, public finances, and expenditure execution
- Authorities committed to reverting to the primary balance target of 2.3 percent of GDP in 2027 following fiscal easing in 2026.
- Recommended fiscal actions:
- Continue efforts to improve tax compliance and broaden the tax base.
- Enhance public financial management, including preventing the reemergence of expenditure arrears.
- Resolve bottlenecks to spending execution—including disaster-related support—for effective post-cyclone recovery and reconstruction.
- Accelerate reform of state-owned enterprises.
- Maintain cost-recovery energy pricing to minimize fiscal risks.
- Prioritize adequate targeting and coverage of social safety nets to protect vulnerable families.
Monetary policy, external adjustment, and financial stability
- Monetary policy guidance:
- Monetary policy should remain prudent, agile, and data-dependent to safeguard price stability under heightened global uncertainty.
- Exchange rate flexibility is paramount to support external adjustment in the face of shocks without undermining reserve accumulation.
- Foreign exchange intervention should be limited to addressing excessive volatility.
- Balance of payments restrictions should be phased out.
- Financial sector safeguards:
- Strengthen operational risk, cybersecurity, and AML/CFT safeguards to preserve financial stability.
Debt management and market access
- Debt restructuring is nearing completion.
- IMF recommendation: accelerate progress toward building capacity of the Public Debt Management Office to:
- promote prudent debt management practices;
- deepen domestic debt markets;
- support Sri Lanka’s eventual return to international capital markets.
Structural reforms and growth agenda
- Building resilience to shocks and achieving strong, durable, and inclusive growth requires:
- steadfast implementation of governance reforms;
- bold reforms to improve the efficiency and fairness of the tax system;
- liberalization of trade;
- addressing labor market rigidities;
- enhancing the business environment to attract investment, create jobs, and bring poverty rates down.
Program assessment and next steps
- Progress in meeting commitments under the IMF-supported program will be formally assessed in the context of the Seventh Review of the Extended Fund Facility (EFF) arrangement in the upcoming IMF mission in the fall.
- The dates of the mission will be announced in due time.
- The mission noted that the views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.
IMF Communications Department — Press Release dated June 30, 2026
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- Press Release-English