Central Bank signals stability as IMF Mission Review begins
Sri Lanka’s external sector is showing a mixed but resilient performance in the face of escalating tensions in West Asia, the Central Bank (CB) announced just as an International Monetary Fund’s (IMF) staff team now in the island began its combined fifth and sixth reviews of the Extended Fund Facility (EFF) programme.
The mission of the IMF team is to evaluate the present economic conditions and changes in the viewpoint require alterations to policies and targets under the programme, CB Governor. Nandalal Weerasinghe disclosed.
Dr. Weerasinghe, addressing a monetary policy review media briefing in Colombo on Wednesday, emphasised that there is currently no justification for imposing restrictions on imports and capital flows.
He said worker remittances remained robust even as tourism experiences a notable decline and the country with improved macroeconomic buffers would be able to face current geo political strains in West Asia.
Contrary to concerns that geopolitical instability could disrupt inflows from overseas workers, remittances, the country’s largest source of foreign exchange, have not only remained stable but have exceeded expectations in recent months.
The CB will intervene in the foreign exchange market to ease day-to-day volatility while maintaining the flexible exchange rate in accordance with inflation-targeting monetary policy framework, he revealed.
The IMF staff team will be focusing on the fiscal response to the recent cyclone, monetary policy, financial sector stability, and the impact of the West Asia conflict on tourism, trade, and remittances.
All four previous reviews have focused on changes to conditions relating to new developments, the CB Governor said adding that current assessment would be on external shocks from the ongoing conflict.
The government has met key targets in 2025 including cost-recovery energy pricing and automatic tariff adjustments achieving quantitative targets for end-March 2025, with minor exceptions like expenditure arrears.
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