Sri Lanka IMF EFF agreement remains unchanged after discussions with the International Monetary Fund, which reviewed the country’s economic path following Cyclone Ditwah, reinforcing confidence in the ongoing reform programme and fiscal direction.
Sri Lanka IMF EFF programme stays on track despite cyclone impact
Sri Lanka’s agreement with the International Monetary Fund under the Extended Fund Facility will continue without amendments, following a recent IMF mission to the island to assess the economic impact of Cyclone Ditwah. According to a statement issued by the Presidential Media Division, IMF representatives acknowledged that despite the severe disruption caused by the disaster, Sri Lanka remains aligned with the macroeconomic objectives agreed under the programme.
The visit by the IMF team was initially expected to conclude the fifth review of the EFF, a procedural step required before the release of the sixth tranche of financial support. However, government sources clarified that the primary purpose of the mission shifted toward evaluating post-disaster conditions and their implications for economic stability. As a result, the formal review process was not completed during this visit.
Officials stated that IMF representatives emphasised Sri Lanka’s continued progress on its reform agenda, describing the country’s economic direction as positive even amid extraordinary challenges. The assurance that there would be no changes to the Sri Lanka IMF EFF framework was interpreted by policymakers as a strong signal of institutional confidence in the government’s fiscal and structural policies.
While the programme remains intact, discussions on the release of the sixth tranche have been postponed. The IMF indicated that negotiations related to the next disbursement are expected to resume in March, extending the timeline beyond the original expectation of approval in December 2025. This delay underscores the sensitivity of programme reviews to external shocks, particularly those related to climate-driven disasters.
Despite the postponement, the IMF reportedly commended Sri Lanka’s ability to manage its public finances under pressure. Of particular note was the government’s capacity to present a supplementary budget estimate amounting to Rs. 500 billion, made possible by a surplus position in the Treasury. The IMF described this development as noteworthy, given the constraints typically faced by economies undergoing adjustment programmes.
The President clarified that the supplementary estimate does not reflect a relaxation of fiscal discipline or a deviation from responsible financial management. Instead, it was positioned as evidence of improved revenue performance and tighter expenditure controls achieved under the reform framework supported by the IMF. According to the Presidential Media Division, future government initiatives will continue to align with these principles.
Sri Lanka’s engagement with the IMF has been central to restoring investor confidence, stabilising public finances, and rebuilding foreign reserves following the country’s recent economic crisis. The continuation of the EFF without modification suggests that core targets related to fiscal consolidation, debt sustainability, and structural reform remain achievable, even in the face of unforeseen disruptions.
Analysts note that the IMF’s stance may also provide reassurance to external creditors and multilateral partners monitoring Sri Lanka’s recovery trajectory. Maintaining the integrity of the Sri Lanka IMF EFF programme is seen as essential for sustaining reform momentum and ensuring continued access to international financial support.
As Sri Lanka prepares to re-engage with the IMF on the delayed tranche discussions, policymakers are expected to focus on balancing disaster recovery needs with longer-term fiscal commitments. The coming months will be critical in demonstrating that economic stabilisation efforts can be preserved alongside targeted relief and reconstruction measures.