The International Monetary Fund (IMF) said on Monday 5 October that it had reached a preliminary agreement with Sri Lanka that will allow the country to access about $345 million from its $2.9 billion programme.
The IMF said the economy had recorded 11 consecutive quarters of expansion after contracting 7.3 percent in 2022. It warned that risks remain from uncertainty over the Middle East war, global trade policy and the El Niño weather pattern.
The Fund also criticised the government’s decision earlier this month to reinstate a $126 million diesel subsidy. It said fuel prices should keep adjusting with international markets while vulnerable households are protected. It added that the Central Bank of Sri Lanka should be ready to tighten monetary policy further if higher energy prices cause a second round of inflation.
The central bank recently raised interest rates by 100 basis points to 8.75 percent. For readers, the IMF’s stance bears on fuel prices, borrowing costs and the pace of economic recovery.
The disbursement is expected to be the second-last under the programme, which is due to end in March 2027. Sri Lankan authorities have yet to decide whether to seek a new arrangement.
