IMF Staff Country Reports

This paper presents Sri Lanka’s 2024 Article IV Consultation and Second Review under the Extended Fund Facility, Request for Modification of Performance Criterion, and Financing Assurances Review. Performance under the program has been strong. All quantitative targets for end-December 2023 were met, except the indicative target on social spending. Most structural benchmarks due by end-April 2024 were either met or implemented with delay. Nevertheless, the economy is still vulnerable and the path to debt sustainability remains knife-edged. Sustaining the reform momentum and efforts to restructure debt are critical to put the economy on a path toward lasting recovery and debt sustainability. The Article IV Consultation focused on wide-ranging reforms to restore macroeconomic stability and debt sustainability, maintain price stability, safeguard financial stability, rebuild external buffers, and implement growth-oriented structural reforms, including by strengthening governance. The authorities need to press ahead with their efforts to address structural challenges to unlock long-term potential.