IMF staff agree Sri Lanka's seventh EFF review, ask to keep anti-corruption laws intact

International Monetary Fund staff and Sri Lanka reached a staff-level agreement on the seventh review of the country's Extended Fund Facility (EFF), the IMF said in a press release dated 4 October. Completion of the review by the Executive Board would release SDR 254 million, about $345 million, and bring total disbursements under the arrangement to SDR 2.032 billion, about $2.7 billion.

The agreement is conditional. According to the release, Board approval depends on two things: the Finance Minister presenting a 2027 budget to Parliament in line with the parameters of the programme, and completion of the financing assurances review, which covers multilateral contributions and progress on debt restructuring. The release gives no date for either step or for the Board meeting.

The governance content of the release is one sentence. Among its policy recommendations, staff list the need to "Preserve the integrity of the anti-corruption legislative framework to enhance public trust." The release does not name a specific law, institution or pending amendment, and it does not refer to asset declarations or a governance diagnostic action plan. It is the only governance recommendation in the release, and it asks for existing legislation to be kept intact rather than extended, ahead of a budget on which Board approval now depends.

What the agreement requires

The EFF was approved on 20 March 2023 for SDR 2.3 billion, about $3 billion, according to the IMF. The mission, led by Evan Papageorgiou, worked from 10 to 23 September and later met Central Bank of Sri Lanka Governor P. Nandalal Weerasinghe, Secretary to the Treasury Harshana Suriyapperuma and Senior Economic Advisor to the President Duminda Hulangamuwa, among other officials.

The policy list in the release runs as follows:

• Energy and fiscal: domestic fuel prices should track international prices, energy pricing should remain cost-recovering, and any support for vulnerable households should be targeted, budgeted, costed and time-limited.
• Social protection and monetary policy: wider and better-targeted safety nets, and readiness to tighten monetary policy if the effects of the Middle East war spread to broader inflation.
• Revenue and investment: a medium-term revenue strategy, stronger public investment management to ease capital spending bottlenecks, and faster recovery and reconstruction after Cyclone Ditwah.
• Exchange rate: greater flexibility to absorb shocks and support reserve accumulation.
• Growth: trade liberalisation, modernised business and labour rules, wider access to finance, digital public infrastructure and closing infrastructure gaps.

The numbers behind the review

Economic activity grew 4.2 per cent in the second quarter of 2026, the eleventh consecutive quarter of growth, according to the release. Headline inflation was 8 per cent year on year in September, and gross official reserves stood at $6.9 billion at the end of August. Staff describe banks as well capitalised and profitable and first-half fiscal performance as strong, without figures for revenue or the primary balance.

Debt restructuring is described as largely complete. The release says risks remain tilted to the downside and names the Middle East war, global trade policy and El Niño.

The disbursement arithmetic is consistent with an equal tranche at each step: eight tranches of SDR 254 million come to SDR 2.032 billion, which leaves about SDR 268 million of the SDR 2.3 billion arrangement for the remaining reviews, a Data Desk calculation from the release's figures. Sri Lanka already owed the Fund several times its quota before this tranche. Its IMF country page shows outstanding purchases and loans of SDR 1,761.9 million at 31 March 2026, against a quota of SDR 578.8 million, about three times quota on the same calculation. The page records 18 arrangements since Sri Lanka joined the Fund on 29 August 1950.

What the release does not say

The release does not give a list of prior actions, structural benchmarks or their status, the size of the 2027 budget's primary balance target, or the remaining creditors in the restructuring. Those normally appear in the staff report, which the country page does not yet list; the latest country report it shows is the June 2024 Article IV consultation and second review.

The next documents to read are the 2027 budget presented to Parliament and, after it, the Executive Board's decision on the seventh review.