The ongoing IMF Sri Lanka review marks a crucial step in the nation’s post-crisis recovery as the International Monetary Fund conducts its fifth evaluation under the Extended Fund Facility (EFF) program. With steady economic growth, improved tax revenue, and reduced inflation, Sri Lanka’s progress continues to draw international attention and optimism from global financial observers.
Fifth IMF Sri Lanka review shows growth, improved revenue, and stable inflation
An International Monetary Fund (IMF) mission is currently in Sri Lanka conducting the fifth review of its Extended Fund Facility (EFF) program, signaling ongoing international confidence in the country’s economic recovery path. The IMF noted that Sri Lanka’s economy is showing significant resilience, supported by improved fiscal performance and strong government commitment to reform.
IMF Communications Director Julie Kozack confirmed in Washington that the mission team is presently engaged in discussions with Sri Lankan authorities. While specific outcomes will be disclosed at the conclusion of the visit, Kozack emphasized that “the program is achieving impressive progress,” highlighting improvements in revenue collection and inflation control.
According to the IMF, Sri Lanka’s economic growth rebounded to 5 percent in 2024, an encouraging turnaround following the severe financial crisis. The revenue-to-GDP ratio also rose sharply from 8.2 percent in 2022 to 13.5 percent, indicating stronger fiscal discipline. Debt restructuring is nearly complete, and overall program performance under the IMF Sri Lanka review has been described as “very strong.”
Sri Lanka entered the IMF program after defaulting on external debt, caused by years of aggressive monetary policies and inflationary open market operations. Analysts note that the country’s earlier attempts to stimulate growth through flexible inflation targeting contributed to repeated currency crises and rising foreign borrowings. However, recent stabilization efforts have helped restore macroeconomic confidence.
The IMF Sri Lanka review also reflects a shift toward more disciplined central banking practices. The Central Bank has paused excessive liquidity injections and is maintaining higher interest rates to encourage savings and strengthen reserves. In August, it recorded foreign reserve purchases of USD 142 million, reflecting improved currency management.
Inflation has now returned to pre-crisis levels comparable to developed economies, easing pressure on households and businesses. Planning and investment decisions are becoming more predictable as price stability returns. However, analysts caution that if inflationary pressures rise again, it could trigger renewed social unrest and financial instability similar to past crises in other nations.
The IMF review underscores the importance of maintaining policy stability and avoiding politically driven monetary decisions. Sri Lanka’s experience shows that sustained discipline in fiscal and monetary frameworks is essential for long-term economic stability and investment confidence.
As the IMF Sri Lanka review progresses, the government’s commitment to reforms, coupled with prudent monetary policy and transparent governance, will play a pivotal role in steering the nation toward sustainable growth and restoring its global financial credibility.