IMF Approves More Funds for Sri Lanka

The International Monetary Fund (IMF) has approved $334 million in financial support for Sri Lanka as part of its ongoing program to help the country’s economy recover. This brings the total IMF assistance given to Sri Lanka so far to $1.34 billion.

The IMF stated that Sri Lanka is making good progress with its economic recovery, meeting most of the targets set under the program. However, the government has not fully met its social spending goals, which are meant to support the country’s poorest citizens. Despite this, Sri Lanka has achieved a major milestone by successfully completing a bond exchange, an important step in reducing its debt burden.

The IMF first approved this financial support plan in March 2023, with a total package of $3 billion. The program is designed to help Sri Lanka stabilize its economy, reduce debt, and strengthen governance while ensuring that the most vulnerable people are protected.

According to IMF Deputy Managing Director Kenji Okamura, Sri Lanka’s economy is recovering well. Inflation is under control, tax collection is improving, and foreign reserves are increasing. The country has seen an average economic growth rate of 4.3% since the third quarter of 2023, and by the end of 2024, it is expected to have regained 40% of the losses suffered between 2018 and 2023.

However, the IMF warns that Sri Lanka must continue its reform efforts to avoid setbacks. It stresses the importance of increasing government revenue, ensuring fair tax collection, and removing unnecessary tax exemptions. Meeting social spending targets is also crucial to protect those most affected by economic hardships. The government must also adjust electricity prices to prevent financial losses from state-owned enterprises and manage its capital spending more efficiently.

Sri Lanka’s progress in restructuring its debt is seen as a positive step, but the country must finalize agreements with international creditors to fully restore financial stability. The IMF also emphasizes the need for strong banking reforms to support businesses and ensure long-term growth.

While Sri Lanka’s economy is on the path to recovery, it remains fragile. Any missteps in policy could slow down progress, making it essential for the government to stay committed to its economic reform plan. If the country continues on this path, it could regain investor confidence and achieve lasting financial stability.