IMF gives initial approval for $700M loan tranche to Sri Lanka

The International Monetary Fund said Thursday it had reached a staff-level agreement with Sri Lanka, paving the way for the South Asian nation to receive about $700 million in fresh financing, subject to final approval by the Fund’s executive board.

The agreement follows the completion of the fifth and sixth reviews of Sri Lanka’s $3 billion loan program under the IMF-backed reform package, according to the lender.

The planned disbursement would provide additional support for Sri Lanka as it continues efforts to stabilize its economy under the program launched after the country’s severe financial crisis.

Sri Lanka has been implementing a series of fiscal, monetary, and structural reforms under the IMF program aimed at restoring debt sustainability, rebuilding reserves, and supporting broader economic recovery.

This latest staff-level agreement marks another step in that process, though the release of funds still depends on the IMF executive board’s formal sign-off.

“Sri Lanka is significantly exposed to the Middle East conflict, which has heightened energy prices, disrupted a key air hub for tourists, and affected Sri Lankans working in the region. Authorities have ameliorated disruptions to economic activity by securing sufficient fuel supplies for households and industries," an IMF statement said.

It added that the heightened downside risks to the economy from disaster risks, persistent trade policy uncertainty, and the Mideast conflict highlight the urgency to accelerate the reform momentum to safeguard macroeconomic stability, enhance Sri Lanka’s resilience to shocks, and maintain the economy on a path toward recovery and inclusive growth.