IMF ready to support Sri Lanka beyond current programme

The International Monetary Fund (IMF) has pledged continued support for Sri Lanka beyond the expiry of its current lending programme in March, while stressing that completing the remaining reviews and consolidating the economic gains must remain the immediate priorities.

IMF Asia and Pacific Department Deputy Director Sonali Jain-Chandra said a new financing arrangement was among several options available for future engagement, although any request for another programme would be the government’s decision.

“There are many ways in which the IMF can support Sri Lanka, whether it’s a new financing arrangement, whether it’s granular policy advice in the context of surveillance or capacity development, of which Sri Lanka is a very significant beneficiary,” she told the Asia-Pacific Department’s Regional Economic Outlook press briefing at the 2026 Annual Meetings.

“So, what I would say is we stand ready to support Sri Lanka in any way that they desire as appropriate. This is something for us to discuss in the future. But the IMF will remain a very committed partner to Sri Lanka.”

Jain-Chandra was responding to a question on whether Sri Lanka needed a successor arrangement, given its exposure to the climate and oil shocks and debt repayments resuming in 2028.

She did not indicate that another programme was necessary or announce discussions on a successor arrangement. Instead, she emphasised the work remaining under the current Extended Fund Facility, which expires in March 2027.

“We reached a staff level agreement on the seventh review in early October. That’s going to be considered by our board in the coming weeks. And then after that, there’s another review mission that will take place before the programme expires in March,” she said.

“So, I think it’s very important to keep focused on the macroeconomic stabilisation that’s happening and consolidating also the reform gains that I outlined.”

She offered a strong endorsement of Sri Lanka’s performance under the programme, highlighting improved public finances, sustained economic growth, progress on debt restructuring and governance reforms.

“The macroeconomic situation is much improved. In contrast to other countries, the fiscal performance is actually very strong. The revenue ratio has doubled. The debt restructuring is largely complete. Growth has been positive for eleven consecutive quarters after the trough we saw during the crisis,” Jain-Chandra said.

“And on the structural front, there have been important improvements, including governance, which has been a core part of the programme. So, the programme has been delivering very strongly.”

However, the IMF’s favourable assessment of programme achievements comes against the renewed external pressures identified in its October Regional Economic Outlook for Asia and the Pacific.

The report places Sri Lanka among the economies where headline inflation has risen the fastest, following the energy shock, adding to the cost-of-living pressures.

It notes that the global energy prices and in emerging market economies, the currency depreciation have accounted for much of the recent increase in inflation across the region.

Sri Lanka is also named alongside India, Indonesia, Japan and Korea, among the economies that intervened in foreign exchange markets during the currency volatility. The report does not specify the scale or direction of Sri Lanka’s intervention.

On the fiscal response, Sri Lanka is cited among the countries that introduced broader packages addressing several effects of the energy shock. The report identifies fertiliser support and household relief through cash transfers and cost-of-living top-ups among the measures adopted by the country.

These pressures form the backdrop to the decisions on Sri Lanka’s engagement with the IMF after the current programme concludes. Jain-Chandra nevertheless made clear that the choice of a future arrangement rests with the authorities.

“This is the authorities’ prerogative, whether they would like to request an IMF programme,” she said.

Daily FT