IMF says hard-won economic gains vulnerable to fresh shocks

IMF Mission Chief for Sri Lanka Evan Papageorgiou says fresh funds aimed at bridging humanitarian relief and long-term reconstruction Identifies agriculture and tourism as most exposed sectors Expects inflation risks and widening current account deficit in short term Says Fifth EFF Review deferred; IMF mission planned for early 2026 Insists on transparent, well-targeted emergency spending Calls on CBSL to maintain monetary discipline and avoid money financing Reaffirms commitment to protecting Sri Lanka's hard- won gains

- BY CHARUMINI DE SILVA

THE International Monetary Fund (IMF) on Friday underscored both support and caution as the country seeks emergency assistance under its Rapid Financing Instrument (RFI) in the aftermath of Cyclone Ditwah, warning that the country's hardwon economic recovery remains vulnerable to fresh shocks.

Speaking at a virtual press conference, IMF Mission Chief for Sri Lanka Evan Papageorgiou said the supplementary allocation of around $ 206 million is intended to go beyond immediate disaster relief and help sustain recovery efforts.

"The supplementary budget will help bridge the gap between immediate humanitarian needs and the longer term reconstruction efforts," Papageorgiou said. He noted that the cyclone struck at a particularly sensitive moment, just as Sri Lanka was emerging from one of the deepest economic crises in its history. According to Papageorgiou, the IMF-supported reform program under the Extended Fund Facility (EFF) has already begun to deliver tangible outcomes.

"These include a robust economic recovery, price stability, and progress in rebuilding foreign exchange reserves," he said, adding that revenue-based fiscal consolidation and public financial management reforms have strengthened fiscal discipline and reduced risks.

On debt sustainability, Papageorgiou said Sri Lanka's restructuring efforts have provided critical breathing space. "Debt restructuring has moved public debt towards a more sustainable track," he said.

However, he issued a blunt warning that the recovery remains incomplete. "The economy remains fragile and GDP has not yet returned to its pre-crisis level," Papageorgiou cautioned.