IMF Releases USD 695 Million to Sri Lanka Under Reform Programme

The International Monetary Fund (IMF) has approved USD 695 million in fresh funding for Sri Lanka, offering crucial support to the island nation as it struggles to recover from Cyclone Ditwah and mounting economic pressures linked to the conflict in West Asia.

The latest disbursement follows a combined review of Sri Lanka’s economic reform programme under the IMF’s 48-month Extended Fund Facility (EFF) worth about USD 2.4 billion .

In a statement, IMF Deputy Managing Director Kenji Okamura said Sri Lanka had continued to implement reforms despite facing “challenging circumstances,” adding that the programme had helped preserve economic stability and create room for emergency relief measures.

However, the IMF warned that the ongoing US-Iran conflict has significantly worsened Sri Lanka’s economic outlook. Growth for 2026 is projected to slow to 3 per cent , with rising global oil prices expected to fuel inflation, weaken the current account, and hurt tourism revenues, a critical source of foreign exchange for the country.

Sri Lanka has been attempting to rebuild its economy since the 2022 financial crisis, when soaring debt, foreign exchange shortages, and inflation triggered mass protests and political upheaval. The IMF-backed reforms have included tax hikes, tighter fiscal controls, debt restructuring, and efforts to reform state-owned sectors such as electricity.

The government is also implementing temporary relief measures and reconstruction spending after Cyclone Ditwah, which killed more than 600 people and caused an estimated USD 4.1 billion in damages, according to the World Bank.

The IMF said debt restructuring is nearing completion but cautioned that debt sustainability risks remain high.