The International Monetary Fund (IMF) has announced that a staff-level agreement has been reached with the Sri Lankan authorities on the Fifth Review under the Extended Fund Facility (EFF) arrangement. 

 

Evan Papageorgiou, IMF Mission Chief for Sri Lanka, stated that the approval of this staff-level agreement by the IMF Executive Board will depend on the passage of the 2026 Budget Appropriation Bill in the Sri Lankan Parliament in accordance with the terms of the IMF program.

 

Arriving in Sri Lanka on September 24 to conduct the Fifth Review of the EFF arrangement, the IMF delegation led by Evan Papageorgiou held extensive discussions with the relevant officials during their stay. 

 

The meetings focused on the latest macroeconomic developments, progress in implementing economic and fiscal reforms, and a range of related issues.

 

At a press conference held at the auditorium of the Central Bank of Sri Lanka on October 9, Papageorgiou announced the following key outcomes and observations:

A staff-level agreement has been reached between the IMF mission and the Government of Sri Lanka under the Fifth Review of the EFF program. The IMF Executive Board’s approval of this agreement will be contingent upon:

1. The parliamentary adoption of the 2026 Budget Appropriation Bill in line with IMF program commitments;

2. Completion of financial assurance reviews ensuring adequate support from multilateral partners; and

3. Sufficient progress in the debt restructuring process.

 

Once approved by the Executive Board, Sri Lanka will receive USD 347 million, bringing the total disbursements under the program to USD 2.04 billion.

 

Papageorgiou further noted that Sri Lanka’s robust reform program has continued to yield commendable results. The economy recorded 4.8% growth in the first half of 2025, with expectations of sustained growth for the rest of the year. Inflation has remained within a favorable range, with prices increasing by only 1.5% in September. As of the end of September 2025, gross official reserves had risen to USD 6.1 billion. 

 

Fiscal performance during the first half of the year has been notably strong, supported in part by tax revenue from vehicle import duties. The debt restructuring process, he added, is nearing completion.

 

He emphasized that steady fiscal revenue inflows and improvements in external resilience have strengthened the implementation of the EFF-supported program. Continued commitment to reforms remains essential to maintain macroeconomic stability and to enhance resilience against shocks. Given the rising global risks due to volatile trade policies and geopolitical tensions, sustaining these reforms is more crucial than ever.

 

Papageorgiou stressed that the 2026 Budget must align with the core principles of the IMF program. It should include concrete measures such as:

• Sustainable efforts to increase tax revenue,

• Broadening the tax base,

• Curbing tax evasion, and

• Managing revenue losses efficiently.

 

In addition, he highlighted the importance of establishing a cost-recovery energy pricing system, strengthening the governance of state-owned enterprises, and enhancing their financial viability through effective debt management and institutional accountability.