IMF praises Sri Lanka, but ties $ 347 m tranche to 2026 Budget

Fifth Review under $ 3 b program completed

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THE International Monetary Fund (IMF) yesterday said the next tranche of the $3 billion Extended Fund Facility (EFF) arrangement hinges on Sri Lanka's Parliament approving a Budget for 2026 that aligned with IMF program parameters and debt sustainability.

"The 2026 Budget should be in line with program parameters to continue building fiscal space on the back of strong revenue measures and prudent spending execution," IMF Mission Chief Evan Papageorgiou said.

"This requires sustained efforts to improve tax compliance, broaden the tax base, and tackle revenue leakages by strengthening the tax exemption frameworks.

Enhancing public financial management, avoiding the re-emergence of expenditure arrears, and promoting high-quality and efficient public expenditure, including by addressing capital spending under-execution, will contribute to safeguarding fiscal discipline and transparency," Papageorgiou added.

An IMF mission team led by Papageorgiou visited Sri Lanka from 24 September to 9 October, to discuss recent macroeconomic developments and progress in implementing economic and financial policies under the Extended Fund Facility (EFF) arrangement. At the end of the mission, Papageorgiou made the following statement in Colombo: "IMF staff and the Sri Lankan authorities have reached staff-level agreement on the Fifth Review under the 4-year Extended Fund Facility (EFF) arrangement. The arrangement was approved by the IMF Executive Board for a total amount of SDR 2.3 billion (about $3 billion) on March 20, 2023.