'Commendable outcomes' from Sri Lanka's economic reform programme: IMF

Headline inflation was at minus 1.1 per cent YoY in Q2 2025 and is gradually returning to target, while gross international reserves stood at $6 billion at the end of June and tax revenue collection continued improving, the IMF said.

An IMF team, led by IMF mission chief for the country Evan Papageorgiou, recently visited Colombo to discuss macroeconomic developments and progress in implementing economic and financial policies under the government’s economic reform programme supported by the IMF’s Extended Fund Facility (EFF) arrangement.

“While the economic outlook is positive, downside risks have increased on the back of potentially high tariffs on Sri Lanka’s exports, persistent trade policy uncertainty, and heightened geopolitical tensions. This underscores the critical importance of maintaining the reform momentum and the efforts to rebuild fiscal space and external buffers. These reforms will enhance Sri Lanka’s resilience to shocks and safeguard the hard-won economic progress to date,” Papageorgiou said in a statement.

“Maintaining macroeconomic stability requires sustained efforts to raise fiscal revenues. To continue meeting the medium-term primary balance objective of 2.3 per cent of GDP—a key requirement for restoring Sri Lanka’s debt sustainability—the 2026 budget should be underpinned by strong revenue measures and appropriate spending allocations, consistent with programme parameters,” he observed.

“Strengthening the tax exemption frameworks, boosting tax compliance, broadening the tax base, and enhancing public financial management, including to avoid the re-emergence of expenditure arrears, are important. Upcoming bills on public-private partnerships, state-owned enterprises, public procurement, and public asset management should be consistent with the Public Financial Management Act and best practices,” he noted.

Cost-recovery energy pricing should be maintained to minimise fiscal risks and support financial sustainability of the energy utilities. At the same time, protecting the poor and vulnerable through improved targeting, coverage and adequacy of social support remains critical, he added.

ALCHEMPro News Desk (DS)