The International Monetary Fund (IMF) Executive Board has completed the third review of Sri Lanka’s 48-month Extended Fund Facility (EFF), granting the country immediate access to approximately $334 million to support ongoing economic reforms.
Key Highlights:
- Total IMF Disbursement: With this latest installment, Sri Lanka has received $1.34 billion under the EFF program.
- Economic Recovery: Reforms are showing positive results, with inflation low, revenue collection improving, and foreign reserves increasing.
- GDP Growth: The economy has averaged 4.3% growth since Q3 2023, and real GDP is projected to recover 40% of losses from 2018-2023 by end-2024, with continued growth expected in 2025.
- Fiscal Performance: Sri Lanka has met all quantitative targets, except for social spending, while most structural benchmarks due by January 2025 were achieved or slightly delayed.
- Key Reform Priorities:
- Revenue Mobilization: Strengthen tax compliance and avoid exemptions.
- Social Spending: Meet targets and improve the social safety net.
- State-Owned Enterprises: Restore cost-recovery electricity pricing to manage fiscal risks.
- Capital Spending: Ensure efficient execution for long-term growth.
- Monetary Policy: Maintain price stability, prohibit monetary financing, and preserve Central Bank independence.
- Financial Sector Stability: Resolve non-performing loans, improve bank governance, and strengthen insolvency frameworks to boost credit growth.
- Governance & Reforms: Address structural challenges and continue governance reforms to unlock long-term potential.
The IMF underscores the importance of policy discipline and structural reforms to ensure Sri Lanka’s economic stability and sustained recovery.
