• Fiscal targets on track ahead of Oct. assessment
• 7th review to assess end-June performance
• 8th and final review scheduled from March 2027

The Government is confident that Sri Lanka will meet the conditions required for the Seventh Review of the International Monetary Fund (IMF)-supported programme, with fiscal performance currently remaining on track, according to Department of Fiscal Policy Director General Dr. M.K.C. Senanayake.

Speaking to The Sunday Morning, Dr. Senanayake said that the authorities expected the relevant fiscal and other programme requirements to be in line with the IMF-agreed framework by the time of the Seventh Review, which can take place on or after 1 October this year.

“We are confident that all the conditions will be met by the Seventh Review. The fiscal conditions are already on track and by 1 October everything should be in line with the IMF timeline,” Dr. Senanayake said.

The Seventh Review represents one of the final assessments under Sri Lanka’s four-year Extended Fund Facility (EFF) arrangement, which was approved by the IMF Executive Board in March 2023 as the country sought to recover from its worst economic crisis in decades.

According to the IMF’s programme schedule, the Seventh Review is available from 1 October and is principally based on Sri Lanka’s performance against end-June 2026 targets as well as continuous performance criteria. The Eighth Review, the final scheduled review under the current arrangement, is available from 1 March 2027 and will assess performance based largely on end-December 2026 targets.

Under the programme, Sri Lanka’s performance is monitored through a series of quantitative performance criteria, indicative targets, monetary policy conditions, and structural benchmarks.

Among the key areas monitored by the IMF are the Central Government primary balance and tax revenue, accumulation of official international reserves, Central Bank credit to the Government, prevention of new Government expenditure arrears and external payment arrears, social safety net expenditure, and restrictions on Central Bank purchases of Government securities in the primary market.

The IMF has also stressed that Sri Lanka must continue improving tax compliance and broadening the tax base while strengthening public financial management and preventing the re-emergence of expenditure arrears.

In its latest assessment following a visit to Colombo in June, the IMF said that maintaining the reform momentum was critical for preserving fiscal and external sustainability. It noted that following fiscal easing in 2026, the Government had committed to returning to a primary balance target of 2.3% of GDP in 2027.

The IMF has additionally called for accelerated reforms of State-Owned Enterprises, continued cost-recovery pricing for electricity and fuel, adequate targeting and coverage of social safety nets, prudent monetary policy, exchange rate flexibility, further accumulation of foreign reserves, and continued governance reforms.

Several structural measures are also due during the period leading up to the completion of the programme. According to the latest IMF programme documents, these include fiscal, revenue, public financial management, State-owned bank, and other structural reforms, while the 2027 Budget is also expected to remain consistent with the parameters agreed under the programme.

The IMF said in June that Sri Lanka’s progress in meeting its programme commitments would be formally assessed during the Seventh Review mission, adding that the dates of the mission itself would be announced separately. Therefore, 1 October represents the programme’s review availability date rather than necessarily the date on which an IMF mission will commence.

The upcoming assessment follows the IMF Executive Board’s completion of the combined Fifth and Sixth Reviews in May this year, which gave Sri Lanka immediate access to SDR 508 million, equivalent to approximately $ 695 million.

The Seventh Review will examine Sri Lanka’s progress against the end-June 2026 targets, while the Eighth Review, available from 1 March 2027, will assess the end-December 2026 targets and continuous performance criteria before the completion of the current EFF review cycle.

Dr. Senanayake maintained that, from the fiscal policy perspective, the Government remained confident of remaining within the agreed trajectory ahead of the October review.