By: Staff Writer
August 25, Colombo (LNW): Sri Lanka may need to consider an 18th IMF programme as it approaches the end of its existing Extended Fund Facility in mid-2027, with the country facing a potentially more difficult debt-service environment from 2028 onward.
Sri Lankan economist Ganeshan Wignaraja raised the possibility at a recent forum in Colombo, warning that the current IMF arrangement should not be viewed as a permanent solution to the country’s economic vulnerability. In his assessment, the programme provides temporary relief from the crisis, but does not eliminate the structural risks that could return once the current arrangement expires.
The timing is significant. Sri Lanka’s existing EFF is scheduled to end in 2027, while large debt repayments are expected to fall due from 2028. This creates a narrow window in which policymakers must strengthen fiscal credibility, preserve access to international financing and prevent another balance-of-payments crisis.
The argument for a successor programme is also rooted in Sri Lanka’s exposure to external shocks. Wignaraja highlighted vulnerabilities linked to energy, shipping and geopolitical developments in the region. Any major disruption in these areas could quickly increase import costs, weaken foreign-exchange availability and place renewed pressure on the country’s external accounts.
The government’s fiscal strategy for 2027 could make the situation even more politically sensitive. The IMF framework requires a primary budget surplus of 2.3 per cent and places public primary expenditure at a ceiling of 13 per cent of GDP. While these targets are intended to strengthen fiscal sustainability, achieving them could require politically difficult expenditure decisions.
Public-sector wages are one potential flashpoint. Union leaders have cautioned that the expenditure ceiling could constrain salary increases even while inflation remains at around 5.5 per cent. Such restrictions could intensify industrial pressure and create a direct conflict between fiscal consolidation and demands for higher household incomes.
This is the central political risk facing Sri Lanka: the country needs to preserve fiscal discipline precisely when citizens and public employees may demand greater relief.
A successor IMF programme could therefore provide a framework for maintaining external confidence beyond 2027. But another programme would also mean another period of policy commitments, monitoring and difficult fiscal decisions. It would not remove the underlying economic challenges; instead, it could extend the discipline needed to address them.
The immediate test will be the September 2026 seventh review of the existing EFF. The government must show that it can meet current commitments while convincing creditors and international institutions that the 2027 fiscal targets remain achievable.
Sri Lanka’s recovery therefore faces a crucial transition. The question is no longer simply whether the country can complete its present IMF programme. It is whether the reforms achieved under that programme will be strong enough to withstand the debt pressures, external shocks and political demands waiting beyond 2027.