Sri Lanka: Fourth Review Under the Extended Arrangement Under the Extended Fund Facility, Requests for Waiver of Applicability of Performance Criteria, Modification of Performance Criteria, and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director for Sri Lanka

International Monetary Fund

No 2025/162, IMF Staff Country Reports from International Monetary Fund

Abstract: This paper presents Sri Lanka’s Fourth Review under the Extended Arrangement under the Extended Fund Facility (EFF), Requests for Waiver of Applicability of Performance Criteria, Modification of Performance Criteria, Modification of Performance Criteria, and Financing Assurances Review. Performance under the program has been generally strong with some implementation risks being addressed. Prior actions on restoring cost-recovery electricity pricing for the rest of 2025 and operationalizing automatic electricity tariff adjustment were met. All quantitative targets for end-March 2025, except the stock of expenditure arrears, were met. All structural benchmarks due by end-May 2025 were either met or implemented with delay. 2025Q2 inflation fell below the lower outer band of the Monetary Policy Consultation Clause largely due to energy prices. Debt restructuring is nearly complete. The economic outlook remains positive. However, global trade policy uncertainties pose significant risks to Sri Lanka’s macroeconomic and social stability. If these shocks materialize, the authorities will work closely with IMF staff to assess the impact and formulate policy responses within the contours of the program.

Keywords: upside inflation risk; inflation outlook; I. inflation deviation; lower-than-expected inflation; IMF staff estimate; Arrears; Credit; Global; Middle East (search for similar items in EconPapers)
Pages: 125
Date: 2025-07-03
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