The Sri Lanka IMF review is currently underway as the International Monetary Fund conducts its fifth assessment of the country’s Extended Fund Facility program. Officials say the economy is recovering with stronger tax collections, lower inflation, and progress on debt restructuring.
Sri Lanka IMF review highlights tax gains, steady recovery, and debt restructuring progress
The Sri Lanka IMF review is taking place this week as an International Monetary Fund mission holds discussions in Colombo for the fifth review of the Extended Fund Facility program. Julie Kozack, Director of the IMF Communications Department, confirmed that the team is on the ground and will release a statement at the conclusion of the mission.
According to the IMF, Sri Lanka has made “impressive progress” under the program, with revenue collections improving and inflation at historically low levels. Economic growth has rebounded strongly, reaching 5 percent in 2024, a remarkable turnaround after the crisis years. The government’s revenue-to-GDP ratio has climbed to 13.5 percent, up from just 8.2 percent in 2022, showing significant fiscal improvements though challenges remain.
Debt restructuring is also nearing completion, with overall program performance described as very strong. The IMF noted that Sri Lanka remains committed to achieving the program’s objectives, which are designed to restore economic stability, rebuild reserves, and strengthen long-term growth potential.
The country’s economic crisis was triggered by years of aggressive monetary operations, excessive borrowing, and flawed inflation targeting policies that eventually led to sovereign default. However, policymakers have since scaled back destabilizing practices, and inflation has returned to levels comparable to the United States and Western Europe. This has eased pressure on families and businesses, making planning and investment decisions more predictable.
Despite the improvements, analysts warn that risks remain. A premature return to aggressive inflation targeting could spark social unrest or even a currency crisis, similar to challenges seen in other nations under IMF programs. Interest rates have edged higher in recent months, a trend that could help sustain reserve collections and strengthen financial stability. In August, the central bank purchased 142 million US dollars from commercial banks, up from July, indicating renewed confidence in reserve accumulation.
The Sri Lanka IMF review comes at a critical time as policymakers work to balance stability with growth. While the economy shows signs of resilience, experts emphasize that structural reforms, disciplined monetary policy, and trade liberalization remain essential to avoid repeating past mistakes. With the fifth IMF review in progress, investors and citizens alike are closely watching how Sri Lanka navigates its next phase of economic recovery.