Sri Lanka's economy is showing resilience despite shocks but faces downside risks, the International Monetary Fund said. The IMF staff concluded a visit to the South Asian nation, which is backed by a $2.9 billion program and is working to recover from a 2022 economic crisis.
Sri Lanka's economic recovery is crucial for its citizens and regional stability, as the nation grapples with high inflation and energy costs following a severe economic crisis. The IMF's assessment highlights the ongoing challenges and the need for sustained reforms to ensure long-term stability and growth.
The International Monetary Fund stated on Wednesday that Sri Lanka's economy continues to demonstrate resilience in the face of multiple shocks, although risks remain tilted towards the downside. IMF staff concluded a visit to the South Asian nation, which is currently supported by a $2.9 billion program aimed at helping it recover from a severe economic crisis in 2022, triggered by a critical shortage of dollars.
The IMF review comes as Sri Lanka strives to maintain economic growth and manage high inflation, exacerbated by soaring energy prices since the Gulf conflict began seven months ago. The country, which imports all its fuel, is grappling with increased energy costs, leading to fuel rationing, steep price hikes, and the declaration of Wednesdays as public holidays in an effort to conserve fuel.
According to the IMF, key priorities for Sri Lanka include developing a robust medium-term revenue strategy and administration, ensuring energy cost recovery, and executing capital investments. The lender also advised maintaining the 5% inflation target and the prevailing accountability band, emphasizing the importance of prudent policies and reforms for macroeconomic stability. The IMF approved a $700 million double tranche in May to bolster reserves and forecasts 3% growth for the country this year.
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