The EFF-supported programme aims to restore Sri Lanka’s macroeconomic stability and debt sustainability, mitigate the economic impact on the poor and vulnerable, safeguard financial sector stability, and strengthen governance and growth potential, the IMF said in a statement.

The Executive Board’s decision will enable an immediate disbursement equivalent to SDR 254 million (about $333 million) and catalyse financial support from other development partners.

Kristalina Georgieva, managing director, IMF, said: “Sri Lanka has been facing tremendous economic and social challenges with a severe recession amid high inflation, depleted reserves, an unsustainable public debt, and heightened financial sector vulnerabilities. For Sri Lanka to overcome the crisis, swift and timely implementation of the EFF-supported programme with strong ownership for the reforms is critical.

“Sri Lanka should stay committed to the multi-pronged disinflation strategy to safeguard the credibility of its inflation targeting regime. As the market regains confidence, the authorities’ recent introduction of greater exchange rate flexibility will help to rebuild the reserve buffer. Maintaining a sound and adequately capitalised banking system is important. Implementing a bank recapitalisation plan and strengthening financial supervision and crisis management framework are crucial to ensure financial sector stability. The ongoing efforts to tackle corruption should continue, including revamping anti-corruption legislation.”

Fibre2Fashion News Desk (KD)