IMF praises Sri Lanka’s economic progress amid challenges

The International Monetary Fund (IMF) this week praised Sri Lanka for the progress it has made in implementing economic reforms, despite the difficulties faced by the public.

The IMF noted that these efforts are starting to show positive results.

“With respect to Sri Lanka’s economic performance, Macroeconomic policies in Sri Lanka are starting to bear fruit. Commendable outcomes include a rapid decline in inflation, robust reserve accumulation, and initial signs of economic growth, while also preserving stability in the financial system,” said IMF Director of Communications Julie Kozack, speaking to journalists in Washington D.C. yesterday (May 17). “Overall, programme performance has been strong,” she added.

Kozack highlighted the next steps for debt restructuring, which include concluding negotiations with external private creditors and finalizing agreements with Sri Lanka’s official creditors. The domestic debt operations are mostly completed.

“The initial debt restructuring negotiations with external bondholders ended in mid-April without an agreement and discussions are continuing with a view to reaching agreement in principle. And on the official creditors side, these agreements in principle still need to be finalized,” said Kozack.

In April, IMF Director of the Asia and Pacific Department Krishna Srinivasan mentioned that while progress is evident, more work remains. “I don’t want to jinx it because the road ahead will be harder, but there is progress in terms of growth,” he emphasized.

The IMF states that Sri Lanka needs to continue improving its fiscal policy, build reserves, and enhance resilience. IMF staff and Sri Lankan authorities have reached a staff-level agreement on economic policies to complete the second review of the four-year Extended Fund Facility (EFF) supported program and the 2024 Article IV Consultation.

Once approved by IMF management and the Executive Board, Sri Lanka will have access to about $337 million in financing.