IMF Secures $345 Million Deal for Sri Lanka Amid Recovery Risks

The International Monetary Fund said on Monday it has secured a preliminary deal that will let Sri Lanka draw about $345 million from its $2.9 billion bailout programme. The lender warned that rising energy costs, the El Niño weather pattern and the ongoing West Asia conflict could derail the island’s recovery. The agreement follows Sri Lanka’s return from a sovereign default on $46 billion of external debt in 2022 and a four‑year rescue package approved in 2023. IMF data show the economy has posted 11 straight quarters of growth after shrinking 7.3 % last year. The fund criticised the government’s reinstatement of a $126 million diesel subsidy, urging fuel prices to stay linked to world markets while shielding vulnerable households. It also cautioned the central bank to be ready to tighten policy if energy‑driven inflation returns. Colombo’s central bank recently lifted its policy rate by 100 basis points to 8.75 % but has so far resisted further hikes, citing growth concerns. The new deal is expected to trigger the penultimate disbursement before the programme’s March 2027 expiry, and officials have not yet decided whether to seek a fresh arrangement thereafter.

Context

Sri Lanka’s IMF programme ties financial support to macro‑economic reforms, so future aid will depend on how the country manages debt, inflation and external shocks such as oil price swings and regional conflicts.