WASHINGTON: The International Monetary Fund(IMF)has actually authorized USD 695 million in financing for Sri Lanka as the island country faces the effect of Cyclone Ditwah and the war in West Asia.The IMF’s executive board has actually authorized the quantity following a combined evaluation of Sri Lanka’s financial reform program supported by the 48-month Extended Fund Facility (EFF) plan of about USD 2.4 billion, a declaration stated.
“Sri Lanka’s strong implementation under the EFF arrangement has continued despite challenging circumstances. Gains from the economic reform programme helped preserve economic resilience and provided room to respond to cyclone Ditwah and the Middle East war,” Kenji Okamura, Deputy Managing Director of the IMF, stated in the declaration.Okamura stated the US-Iran war has actually substantially gotten worse Sri Lanka’s financial outlook and slanted dangers to the drawback.“For 2026, growth is projected to slow down to 3 per cent. Higher oil prices would increase inflation and weaken the current account, which would also be adversely impacted by lower tourism receipts. The uncertainty, regarding the war’s intensity and duration, heightens risks to the outlook,” he stated.
Okamura stated financial reducing in 2026 is suitable in action to the shocks, and the federal government is executing a momentary relief plan, while likewise designating extra costs to support healing and restoration following Cyclone Ditwah.“From 2027 onward, the authorities are appropriately committed to reverting to the primary balance target of 2.3 per cent of GDP, as well as complying with the primary expenditure ceiling,” he stated.“Programme performance remains generally strong, but efforts are required to complete public financial and investment management, and electricity sector reforms,” he included.Okamura stated continual earnings mobilisation is vital to make the tax system more effective and growth-enhancing and need to be led by establishing a medium-term income technique.“Debt restructuring is nearing completion, but debt sustainability risks remain high,” he stated.“Monetary policy should continue prioritising price stability. Greater exchange rate flexibility and gradually phasing out the balance-of-payments measures remain critical to rebuild external buffers and resilience,” he stated.Okamura stated well-calibrated structural reforms and restored public facilities are likewise required to enhance the financial investment environment and lift development capacity.Cyclone Ditwah struck Sri Lanka in November in 2015 and triggered disastrous damage in the island country, eliminating more than 600 individuals. A World Bank report pegged direct damages at USD 4.1 billion.