Sri Lankan economy still remains vulnerable: IMF
Posted on December 22nd, 2025
Courtesy The Daily Mirror
Sustained adherence to the reform agenda has underpinned a robust economic recovery, price stability, substantial revenue-based fiscal consolidation, and progress in rebuilding foreign exchange reserves, but the economy remains vulnerable, and GDP has not recovered to its pre-crisis level, according to an IMF official.
Kenji Okamura, Deputy Managing Director and Acting Chair, said it in a statement issued last Friday.
Sri Lanka was hit by a catastrophic cyclone, claiming more than 600 lives and affecting millions more. Flooding and landslides have displaced more than 100,000 people, destroyed critical infrastructure, and devastated livelihoods across the country, he said.
The disaster has created urgent humanitarian and reconstruction needs, generating significant fiscal pressures and balance-of-payments needs. The emergency financial support provided by the IMF under the RFI will help address these pressures.
The government responded swiftly with a package of relief measures, supported by strong fiscal overperformance in 2025. The Central Bank of Sri Lanka stands ready to provide liquidity support to the financial system if needed.
While recovery and reconstruction needs will be substantial, the authorities remain committed to maintaining fiscal prudence to safeguard fiscal and debt sustainability. All emergency spending will be executed in full compliance with the Public Financial Management Act and supported by enhanced monitoring and regular public reporting in line with transparency and accountability standards. The Central Bank will continue to refrain from monetary financing of the budget.
The cyclone struck as Sri Lanka is emerging from a deep economic crisis and the IMF-supported reform programme under the EFF is bearing fruit.
The authorities and IMF team maintain close engagement and will resume discussions at the earliest possible juncture. The IMF stands with the people of Sri Lanka during this difficult time and will continue to support Sri Lanka’s recovery and reconstruction efforts,” he said.