Sri Lanka rupee weaker, bond yields up

Thursday April 9, 2026 11:24 am

ECONOMYNEXT – The International Monetary Fund and Sri Lankan authorities have reached staff-level agreement on economic policies to conclude the combined fifth and sixth reviews of Sri Lanka’s reform program supported by the global lender’s Extended Fund Facility (EFF), the IMF said in a statement.

Once the review is approved by the IMF Executive Board, Sri Lanka will have access to about US$700 million in financing, the IMF said on Thursday (09).

The statement comes after an IMF mission team led by Mission Chief Evan Papageorgiou visited Sri Lanka from March 26 to April 9, 2026, to discuss recent macroeconomic developments and progress in implementing economic and financial policies under the EFF deal.

“IMF staff and the Sri Lankan authorities have reached staff-level agreement on the combined Fifth and Sixth Reviews under the 4-year Extended Fund Facility (EFF) arrangement,” Papageorgiou said in the statement.

“The arrangement was approved by the IMF Executive Board for a total amount of SDR 2.3 billion (about US$3 billion) on March 20, 2023.”

However, he said the staff-level agreement was subject to IMF Executive Board approval depending on the restoration of cost-recovery electricity and fuel pricing while protecting the vulnerable as well as the completion of the financing assurances review, to confirm multilateral partners’ financing contributions and assess adequate progress with debt restructuring, he said.

After completion of the Executive Board review, Sri Lanka would have access to SDR 508 million (about US$700 million), bringing the total IMF financial support disbursed under this arrangement to SDR 1,778 million (about US$2.4 billion).

“Sri Lanka’s ambitious reform agenda continues to deliver commendable outcomes,” Papageorgiou said.

“Debt restructuring is nearing completion, with the successful completion of Sri Lankan Airlines’ debt exchange and further progress in finalizing remaining bilateral agreements”

He said Sri Lanka is significantly exposed to the Middle East conflict, which has heightened energy prices, disrupted a key air hub for tourists, and affected Sri Lankans working in the region.

“Authorities have ameliorated disruptions to economic activity by securing sufficient fuel supplies for households and industries. At the same time, the country needs to address the infrastructure and spending needs caused by Cyclone Ditwah.” “Heightened downside risks to the economy from disaster risks, persistent trade policy uncertainty and the conflict in the Middle East emphasize the urgency to accelerate the reform momentum to safeguard macroeconomic stability, enhance Sri Lanka’s resilience to shocks, and maintain the economy on a path toward recovery and inclusive growth.”

“On this front, it is important to continue building fiscal space through strong revenue measures and prudent spending execution,” Papageorgiou said adding the move requires sustained efforts to improve tax compliance, broaden the tax base, address revenue leakages, and enhance public financial management.

“It is instrumental to restore and maintain cost-recovery fuel and electricity pricing while assisting the most vulnerable. Continued vigilance is needed to minimize fiscal risks and safeguard fiscal discipline.”

The IMF repeatedly emphasized on protecting the vulnerable people from the shocks.

“Protecting the poor and vulnerable, who are disproportionately affected, should remain a priority, and this calls for the steadfast strengthening of social safety nets by improving their targeting, adequacy, coverage, and shock-responsiveness.”

“Rebuilding foreign reserves while allowing for exchange rate flexibility is a necessity amid global uncertainty. Resolving non-performing loans, promoting sound credit growth, and addressing vulnerabilities in some small licensed finance companies will help safeguard financial stability.”

The IMF welcomed the publication of the 2026 government action plan on governance reforms citing that effective implementation will help advance the anti-corruption agenda and support growth.

“It will be key to uphold the independence of Sri Lanka’s anti-corruption body (CIABOC), support the reliability of the beneficial ownership registry, and strengthen fiscal governance through sound legislation on public-private partnerships, state-owned enterprises, public procurement, and public asset management.”

“Unlocking strong and durable growth for all Sri Lankans requires staying the course on reforms, including by sustaining trade liberalization efforts, accelerating digitalization initiatives, streamlining business regulations, and modernizing labor legislation to reduce rigidities.” (Colombo/April 09/2026)