IMF, Sri Lanka strike staff-level pact on funding of $345 million

The International Monetary Fund (IMF) and Sri Lanka have reached a staff-level agreement to unlock about $345 million in funding, according to a statement from the global lender. The agreement is part of the seventh review under the IMF's Extended Fund Facility, which Sri Lanka is pursuing to recover from a 2022 economic crisis caused by a severe dollar shortage.

To fully implement the agreement, the IMF's executive board must approve the deal, and it will rely on Sri Lanka's 2027 budget, which will be presented in parliament next month. This aligns with the programme's conditions and the completion of a review of financing assurances, after which the IMF will grant Sri Lanka access to its special drawing rights worth approximately $345 million. This brings the lender's total disbursed funds to the equivalent of $2.7 billion.

In May, the IMF projected 3% growth for Sri Lanka this year, after approving a $700 million double tranche under the programme to bolster the country's reserves. However, Sri Lanka, an island nation that imports all its fuel, faces potential downside risks from uncertainty over the Middle East war, global trade dynamics, and the impact of the El Niño weather phenomenon. The IMF cautioned the government to permit domestic fuel prices to adjust in line with international rates while safeguarding vulnerable populations.