IMF projects 3.1% growth for Sri Lanka in 2026

The International Monetary Fund (IMF) has revised Sri Lanka’s economic growth forecast to 3.1% for 2026, signaling a return to normal growth levels after the country’s strong recovery from its recent economic crisis.

Thomas Helbling, Deputy Director of the IMF’s Asia and Pacific Department, highlighted Sri Lanka’s progress since the 2022–2023 balance of payments crisis, which had caused a severe recession.

“Sri Lanka had a strong rebound in growth following the crisis, supported by a reform program backed by the IMF,” Helbling said. “Growth reached 5% last year, and 4.8% in the first half of this year. Some of this rebound was due to normalization in economic activity, and some effects are temporary. We now see the economy returning to its trend growth of 3.1%.”

Helbling also confirmed that IMF staff completed the Fifth Review of Sri Lanka’s Extended Fund Facility (EFF) program during a visit in early October, reaching a Staff-Level Agreement on October 9 or 10.

“While it’s only a Staff-Level agreement, it signals that the IMF is satisfied with the progress made,” he noted.

One key focus of the review was electricity pricing reform, which remains an ongoing structural benchmark under the program. Helbling said that maintaining the principle of cost recovery is crucial to reducing fiscal risks linked to state-owned enterprises, including utilities.

“The government has continued to meet performance criteria, and the October assessment was positive. It’s too early to speculate on the next review, but the direction is encouraging,” he added.

When asked about longer-term revenue projections for 2028, Helbling explained that the IMF is currently concentrating on the nearer-term outlook.

“Reforms are progressing. It’s important for Sri Lanka to stay the course and complete its homegrown reform program to fully stabilize the economy. Longer-term concerns, including those about 2028, should be viewed in perspective,” he said.

The IMF’s revised forecast reflects growing confidence in Sri Lanka’s economic recovery and the ongoing commitment to structural reforms aimed at ensuring long-term stability.