Sri Lanka has reached a staff-level agreement with the International Monetary Fund on a fourth review of an Extended Fund Facility bailout, the IMF said on Friday.
On approval by the IMF Executive Board, Sri Lanka will have access to about $344 million in financing, the IMF said in a statement.
Sri Lanka, which plunged into financial crisis due to a record shortage of dollars three years ago, has recovered strongly since securing a four-year program from the global lender in March 2023.
An IMF team was in Sri Lanka this month but agreement proved elusive amid trade turmoil triggered by the U.S., which imposed 44 per cent import tariffs on about $3 billion of the island nation’s exports.
The full tariff was then suspended for three months, but U.S. imports from Sri Lanka will still be subject to a baseline 10 per cent tariff, like those of most other countries.
The IMF said that global trade policy uncertainty still posed “significant downside risks” to Sri Lanka’s economy.
“If these materialize, authorities and staff will work together to assess the impact and formulate policy responses within the contours of the IMF-supported program,” it added.
Increasing power prices, reducing tax exemptions and rebuilding foreign exchange reserves were mentioned by the IMF as areas that Sri Lanka must focus on.
Sri Lanka will also have to extend stronger support to the poor, the IMF said, as U.S. tariffs could hurt the island’s apparel sector, which employs about 300,000 people.
Sri Lanka is on track to post growth of 3.5 per cent this year after 5 per cent last year, the World Bank said in its latest report on Wednesday, unchanged from its October forecast.
A Sri Lankan delegation in Washington for the IMF spring meetings met with U.S. trade officials to discuss tariff concerns, the president’s office said.
Sri Lanka will work with Washington to reduce the U.S.’s bilateral trade deficit and lower tariff and non-tariff barriers, the presidential statement added.
