Overview
- The IMF executive board approved a $695 million disbursement under Sri Lanka’s 48‑month Extended Fund Facility on Thursday, May 28, 2026, making the funds immediately available after a combined review.
- The financing is intended to finance reconstruction after Cyclone Ditwah and to support temporary relief policies, and the IMF has endorsed limited fiscal easing for 2026 with a return to medium‑term primary balance targets from 2027.
- IMF officials said the US–Iran war has pushed up global oil prices and reduced tourism demand, tipping risks to the downside and prompting the fund to cut its 2026 growth forecast for Sri Lanka to about 3 percent.
- The IMF judged programme performance generally strong but said public financial and investment‑management fixes and electricity‑sector reforms remain incomplete, and it noted debt restructuring is nearing completion even as debt sustainability risks stay high.
- The fund urged faster revenue mobilisation, greater exchange‑rate flexibility and gradual removal of balance‑of‑payments measures to rebuild external buffers, with future disbursements tied to completion of key policy and reform milestones and with direct implications for households and reconstruction projects.