December 22, Colombo (LNW): Sri Lanka is still considered capable of meeting its repayment commitments, but the margin for error remains narrow, according to the International Monetary Fund’s latest evaluation, which highlights ongoing vulnerabilities beneath recent economic progress.
The IMF stressed that this outlook is heavily dependent on the authorities’ ability to fully and consistently implement the Extended Fund Facility (EFF), which remains central to the country’s recovery path. Any delays or policy reversals, the Fund warned, could quickly undermine gains made so far.
Despite improvements in macroeconomic management, Sri Lanka’s high public debt burden and substantial financing requirements continue to pose serious risks to long-term debt sustainability. The IMF noted that indicators measuring the country’s capacity to repay have weakened slightly since the Fourth Review, reflecting continued pressure on public finances.
Under the combined Rapid Financing Instrument and EFF arrangements, outstanding IMF credit is expected to peak at around 3.1 per cent of GDP in 2027, a projection that remains unchanged from earlier assessments. While this level is considered manageable, it leaves little room for external shocks or policy slippage.
The report emphasised the need for stronger institutions, sustained fiscal discipline and credible policy frameworks to stabilise the economy over the long term. Building resilience against global volatility, the IMF concluded, will be critical to ensuring that Sri Lanka’s recovery translates into durable financial stability rather than temporary relief.
