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Lanka needs to do more on debt restructuring before a bailout package is finalised, says IMF
The International Monetary Fund (IMF) on June 30 said it has concluded “constructive and productive” discussions with Sri Lankan authorities, but warned that the crisis-ridden island nation needs to do more on debt restructuring and step up structural reforms to address corruption vulnerabilities before a bailout package is finalised.
Sri Lanka is going through the worst economic crisis since its independence from Britain in 1948 and needs to obtain at least $4 billion to tide over the acute shortage in foreign exchange reserves.
“The IMF team had constructive and productive discussions with the authorities on economic policies and reforms to be supported by an Extended Fund Facility arrangement,” the IMF said in a statement.
“The discussions will continue virtually with a view to reaching a staff-level agreement on the Extended Fund Facility arrangement in the near term,” it added.
However, due to the unsustainability of public debt, there is the requirement for “adequate financing assurances from Sri Lanka’s creditors that debt sustainability will be restored,” it warned.
The IMF team visited Colombo on June 20 to continue discussions on an economic programme that could be supported by an IMF lending arrangement, building on the progress made during the May 9-24 virtual mission.
The objectives of the new IMF-supported programme would be to restore macroeconomic stability and debt sustainability, while protecting the poor and vulnerable, safeguarding financial stability, and stepping up structural reforms to address corruption vulnerabilities and unlocking Sri Lanka’s growth potential, it said. The IMF also warned that high fiscal deficit had to be reduced, as well as taming rising inflation.
Since revenue was weak, far-reaching tax reforms were urgently needed to achieve these objectives, it added. On Monday, the Sri Lankan government announced that only essential services will operate from midnight till July 10 and all other operations will be temporarily suspended as the island nation of 22 million faces an acute fuel shortage.
The nearly-bankrupt country, with an acute foreign currency crisis that resulted in foreign debt default, had announced in April that it is suspending nearly $7 billion foreign debt repayment due for this year out of about $25 billion due through 2026. Sri Lanka’s total foreign debt stands at $51 billion.
Since June 24, no fuel tankers with supplies have arrived in the island nation while the state-run fuel retailer Ceylon Petroleum Corporation says no new orders have been placed.
Meanwhile, the government’s statistics office said on Tuesday that the economic growth in the first quarter of this year is projected to see a minus 1.6% growth due to the economic crisis. A release said that fuel shortages had impacted all sectors with reduced production contributing to the negative growth.
The Sri Lankan economy has virtually come to a grinding halt after it has run out of foreign exchange reserves to import fuel. Sri Lankans continue to languish in long fuel and cooking gas queues as the government is unable to find dollars to fund imports.
So far, there have been an estimated thirteen deaths in fuel queues due to exhaustion, physical ailments or accidents. Irate citizens want President Gotabaya Rajapaksa and his government to resign immediately for their inability to tackle the fuel shortages.
News
Sri Lanka, India caught in US-Iran ship crisis
By Shamindra Ferdinando
Iran has sought the Indian intervention, at the highest level, to provide lifesaving support to the crews of empty Iranian vessels stranded just outside Sri Lanka’s 12-nautical mile territorial waters off Galle.
Sources familiar with the issue said that Iran had brought the developing situation to the attention of New Delhi as the crews of almost 20 vessels, included Indian nationals. Sources stressed that the group of vessels that unloaded crude oil a couple of months back were now stranded within Sri Lanka’s Exclusive Economic Zone (EEZ).
The US Navy torpedoed an unarmed Iran frigate, returning from India, on 04 March, 2026, about 19 nautical miles off the Galle coast. The unprovoked attack killed nearly 100 Iranians.
The Iranian Embassy in Colombo has inquired from the Indian High Commission of their response to the situation, sources said. The US has issued a global warning against providing food, water, medicine and other services to the Iranian vessels. The outcome of Iran-India talks on the issue at hand was not known, though sources asserted India may not throw its weight behind Iranian efforts to address the issue.
Responding to The Island queries, sources said both Sri Lanka and India were in a dilemma due to the US warning. India couldn’t ignore the plight of the Indian crew members and the Iranian vessels in its backyard.
The Sri Lankan government remains tight-lipped about the vessels stranded in its EEZ. Our efforts to elicit a response from relevant authorities were in vain. In addition to Indians, there are Bangladeshis among the crew members. Iran has explicitly stated the responsibilities of the countries concerned to provide assistance in terms of international law.
The Iranian position was articulated by its Ambassador to Sri Lanka, Dr.Alireza Delkhosh, recently. In a special statement, Ambassador Delkhosh emphasised that in terms of the Convention on the Law of the Sea (Article 98) as well as SOLAS and SAR
Conventions, Sri Lanka couldn’t refrain from providing the needs of the Iranian vessels stranded in its EEZ.
SLMC leader Rauff Hakeem lambasted the NPP government in Parliament for failing to provide assistance to the Iranian ships. The former Minister alleged that the government was simply carrying out dictates of the US. He strongly criticised the way Foreign Minister Vijitha Herath was handling the issue.
News
Namal further remanded
MP Namal Rajapaksa, who is in remand custody over the controversial Airbus deal, was further remanded until October 27 by the Colombo Magistrate’s Court yesterday (13).
Colombo Chief Magistrate Asanga S. Bodaragama made the order after considering submissions by officers of the Commission to Investigate Allegations of Bribery or Corruption and lawyers representing Rajapaksa.
News
IMF projects Lankan economic growth to moderate amidst mounting global uncertainties
Sri Lanka’s economy is expected to sustain its recovery over the next two years, although growth is projected to moderate amid mounting global uncertainties, according to the International Monetary Fund’s (IMF) latest World Economic Outlook.
In its World Economic Outlook 2026: Resilience Under Strain, Urgent Choices, the IMF projects Sri Lanka’s economy to expand by 4% in 2026, slowing to 3.7% in 2027, following estimated growth of 5% in 2025.
Inflation, meanwhile, is forecast to rise to 5.3% in 2026 and 5.4% in 2027, reversing the average deflation rate of 0.5% recorded in 2025.
Unemployment is expected to remain steady at 3.9% throughout the forecast period.
The projections come amid growing pressure on the global economy from the ongoing conflict in the Middle East, elevated energy prices, geopolitical tensions and trade disruptions.
Sri Lanka’s external position is also expected to weaken, with the current account balance projected to shift from a surplus of 1.6% of gross domestic product (GDP) in 2025 to deficits of 0.5% in 2026 and 0.3% in 2027.
The IMF’s outlook points to continued economic expansion in Sri Lanka, but with slower growth, rising inflation and a narrowing external surplus giving way to current account deficits over the forecast period.
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