• ‘Aswesuma’ extension possible if fiscal targets allow it

President Anura Kumara Dissanayake has assured the International Monetary Fund (IMF) that the Government’s temporary relief measures introduced in response to the Middle East conflict and Cyclone Ditwah will remain capped at Rs. 100 billion and be phased out by end-September, while additional support through the ‘Aswesuma’ welfare programme will be considered only if fiscal targets remain achievable.

The commitment was made in the President’s letter to IMF Managing Director Kristalina Georgieva released alongside the IMF Executive Board’s completion of the combined Fifth and Sixth Reviews of Sri Lanka’s 48-month Extended Fund Facility (EFF) programme. 

The review unlocks an immediate disbursement of SDR 508 million, or about $ 695 million, bringing total IMF disbursements under the programme to roughly $ 2.4 billion. 

“All energy subsidies and other relief measures will be on budget, capped at Rs. 100 billion in total, and phased out by end-September 2026 to safeguard our hard-earned policy buffers,” President Dissanayake stated in the letter.

He added that the Government could consider additional assistance through the ‘Aswesuma’ cash transfer programme during the fourth quarter of 2026 to protect vulnerable groups, provided Sri Lanka remained able to meet its primary surplus target. 

In his letter, the President said that Sri Lanka’s reform programme had restored macroeconomic stability following the economic crisis, citing 5% economic growth in 2024 and 2025, strengthened foreign reserves exceeding three months of imports, stable prices, stronger revenue collection, and debt restructuring progress.

He also pointed to the Government’s response to recent shocks, stating that fiscal space created through reforms enabled authorities to rapidly deploy emergency relief following Cyclone Ditwah and implement targeted measures to cushion the impact of the Middle East conflict while maintaining fuel and electricity price adjustments under cost-recovery pricing commitments. 

The package includes electricity and fuel subsidies, fertiliser support for small farmers, assistance for fishermen, and ‘Aswesuma’ top-ups for vulnerable households. 

The IMF, meanwhile, said that Sri Lanka’s programme performance remained generally strong, with all end-December 2025 quantitative performance criteria met. While a continuous criterion on new external payment arrears was breached, the fund attributed this to a cybercrime incident involving a relatively small missing external debt payment and granted a waiver after corrective action. 

However, the fund warned that the Middle East conflict and Cyclone Ditwah had materially weakened Sri Lanka’s economic outlook.

According to the IMF report, real Gross Domestic Product (GDP) growth, which reached 5% in 2025, is projected to slow to 3% in 2026 due to the fallout from the two shocks. Cyclone Ditwah alone caused an estimated $ 3.4 billion in damages and losses, equivalent to around 3.1% of GDP. 

The IMF further stated that the Middle East conflict was affecting Sri Lanka through rising energy costs, tourism disruptions, and inflationary pressures. Tourism arrivals fell 20% year-on-year in March amid regional aviation disruptions, while administered fuel prices increased cumulatively by 38–46% since February to maintain cost-recovery pricing. Headline inflation rose to 5.4% in April, its highest level since early 2024, largely driven by these energy price increases.

The IMF said temporary fiscal easing in 2026 was appropriate given the shocks, noting that the Government had allocated additional expenditure for relief, recovery, and reconstruction efforts and activated measures to shield vulnerable groups. However, it stressed that Sri Lanka had committed to reverting to its programme fiscal targets from 2027, including the primary balance target of 2.3% of GDP and adherence to expenditure ceilings. 

The IMF also said that debt restructuring was nearing completion but cautioned that debt sustainability risks remained high. It cited the March 2026 debt exchange involving SriLankan Airlines’ $ 175 million international bond as a key milestone and noted progress on electricity sector reforms, including steps towards unbundling the Ceylon Electricity Board (CEB) to improve efficiency and financial transparency. 

While describing Sri Lanka’s recent policy response as adequate, the IMF stressed that maintaining reform momentum would be essential. The fund called for stronger public financial management reforms, continued revenue mobilisation, greater exchange rate flexibility, gradual removal of balance-of-payments measures, and sustained structural reforms to strengthen resilience in what it described as a shock-prone environment.