Beyond bailouts: Can Sri Lanka reform without IMF?

“True sovereignty is not the absence of foreign oversight—it is the pres- ence of domestic courage to reform, even when no one is watching.” Introduction: A question of sovereignty or survival?

- By Prof. Asoka S. Seneviratne

IN 2022, Sri Lanka became the first Asian country in 20 years to default on its sovereign debt. Since then, the International Monetary Fund (IMF) has supported the country's economic recovery through a multi-billion-dollar Extended Fund Facility (EFF) agreement. However, as debt restructuring continues and the economy hovers between fragile recovery and renewed crisis, a national debate has emerged: Can Sri Lanka reform on its own without IMF conditionality?

This question involves not just economic viability but also deeper issues of sovereign governance, institutional trust, and long-term national resilience. Some argue the IMF causes unnecessary hardship. Others say that reform is unavoidable, whether or not the Fund is involved. But asking whether Sri Lanka can exit the IMF raises an even more fundamental question: Can we build and maintain trust—both domestically and internationally-through our reform efforts?

At the same time, the Opposition argues that the AKD/NPP Government is also follow ing the previous regime or the IMF bail out without a clear development growth plan of our own or specific reforms.

Reforming "on our own" isn't just about replacing the IMF with domestic slogans or alternative donors - it involves taking on the full burden of structural reform without the external pressure or support that institutions like the IMF offer.

To develop a sustainable economic path independent of IMF involvement, Sri Lanka would need to show bold, credible, and consistent action in six key areas: (i) fiscal discipline, (ii) debt restructuring, (iii) state enterprise reform, (iv) banking sector governance, (v) anti-corruption efforts, and (vi) market signals. These are not optional but essential conditions for survival in a globalised, capital-dependent economy.