IMF Staff Team Concludes Visit to Sri Lanka
IMF News, September 23, 2026
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- IMF Staff Team Concludes Visit to Sri Lanka
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Bibliographic details
- Published: September 23, 2026
Mission context and scope
- Mission dates: September 10-23, 2026.
- Purpose: Discussions relating to the Seventh Review of the IMF’s Extended Fund Facility (EFF) and the 2026 Article IV Consultation.
- At the end of the mission, IMF staff issued a statement; the mission will not result in a Board discussion.
- Press Release No. 26/301; statement dated September 23, 2026.
Key economic findings and recent developments
- Economic activity:
- Economic activity expanded by 4.2 percent in 2026Q2, marking eleven consecutive quarters of strong growth.
- Inflation and price environment:
- Headline inflation rose to 8 percent y/y in August due to the global oil price shock.
- Expectations are broadly anchored.
- External position and reserves:
- Gross official reserves have increased, reaching US$6.9 billion at end-August 2026.
- Financial sector:
- Banks remain well capitalized and profitable.
- Fiscal and debt:
- Fiscal outturn in 2026H1 was strong.
- Debt restructuring is largely completed.
- Downside risks highlighted:
- Uncertainty over the duration and intensity of the Middle East war.
- Global trade policy.
- Impact of El Niño.
- Other shock-prone environment risks that could affect macroeconomic stability.
Policy priorities and staff recommendations
- Fiscal and revenue policy:
- Develop and implement a medium-term revenue strategy to sustain revenue mobilization while improving the efficiency and fairness of the tax system.
- Broaden the tax base and rationalize tax exemptions and incentives.
- Strengthen revenue administration to improve tax compliance and support durable revenue gains.
- State-owned enterprises and energy:
- Uphold cost-recovery energy pricing to minimize fiscal risks arising from state-owned enterprises.
- Public investment and reconstruction:
- Address bottlenecks to capital spending execution, including to accelerate cyclone Ditwah-related recovery and reconstruction.
- Monetary and exchange rate policy:
- Monetary policy should stand ready to address inflationary pressures and ensure price stability within the medium-term period in line with the flexible inflation targeting framework.
- Greater exchange rate flexibility is key to absorbing shocks and supporting reserve accumulation.
- At the first statutory review, it would be prudent to maintain the 5 percent inflation target and the current accountability band. The statement notes that the current target preserves flexibility amid high food and energy price volatility, and convergence toward a lower target could be considered at the next review once a track record of low and stable inflation is established.
- Governance and anti-corruption:
- Preserve the integrity of the anti-corruption legislative framework; select clauses from recently tabled amendments could weaken transparency and accountability.
- Structural reforms for transformation:
- Sustain momentum on structural reforms to foster an enabling business environment and attract investment, including by:
- Liberalizing trade.
- Modernizing business and labor regulations.
- Broadening access to finance.
- Advancing digitalization.
- Strengthen social safety nets to protect the most vulnerable during the transition from stabilization to transformation.
- Social inclusion and regional development:
- Support investments in connectivity, skills, and sectors such as agriculture, fisheries, tourism, and renewable energy—especially in the Northern Province—to unlock growth and create jobs.
- Strengthen social protection so benefits of economic transformation are shared more broadly.
Institutional engagement and outreach
- High-level meetings held with:
- His Excellency the President and Finance Minister Anura Kumara Dissanayake.
- Honorable Prime Minister Dr. Harini Amarasuriya.
- Honorable Labor Minister and Deputy Minister of Finance and Planning Prof. Anil Jayantha Fernando.
- Central Bank of Sri Lanka Governor Dr. P. Nandalal Weerasinghe.
- Secretary to the Treasury Dr. Harshana Suriyapperuma.
- Senior Economic Advisor to the President Mr. Duminda Hulangamuwa.
- Chief Advisor to the President on Digital Economy Dr. Hans Wijayasuriya.
- Governor of Northern Province Honorable Nagalingam Vethanayahan.
- Other senior government and CBSL officials.
- Outreach included meetings with parliamentarians, private sector representatives, civil society organizations, development partners, and a field visit to Jaffna.
- Ongoing engagement: Discussions are continuing with the goal of reaching staff-level agreement in the near term to pave the way for timely completion of the Seventh Review.
IMF Communications Department — End-of-Mission press release (staff views), September 23, 2026.
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