Sri Lanka IMF Program Stands Firm Despite Cyclone

COLOMBO (News 1st); Evan Papageorgiou, IMF Mission Chief for Sri Lanka, announced that an IMF team will return to the country in a matter of weeks to discuss key issues, including how the effects of a recent cyclone should be reflected in the IMF-supported program.

He stressed that the fundamental structure of the program remains unchanged. Up until the cyclone struck on November 27-28, the program was performing strongly. The cyclone arrived at a difficult time, introducing additional uncertainties that will affect some parameters and quantitative performance criteria. These impacts will be discussed with Sri Lankan authorities to determine the necessary accommodations. However, Papageorgiou affirmed that the program itself stands in its current form.

Every review provides an opportunity for in-depth assessment, Papageorgiou noted. Upon returning, the IMF will examine factors informing their evaluation, incorporating recent economic developments—particularly the cyclone and its effects, along with subsequent government support. This will involve updating macroeconomic projections for the foreseeable future and, as needed, adjusting program parameters and conditionality.

One key focus will be precisely how to incorporate the cyclone's impact. Beyond that, the team will review the rest of the program's conditionality. At the time the cyclone hit, the IMF was preparing to go to its executive board for the fifth review of the Extended Fund Facility (EFF).

Papageorgiou clarified that the cyclone was not a policy mistake or decision but an obvious natural disaster. The EFF remains in place, and the discussions will center on accommodating the event within its existing framework. The next step is completing the fifth review. Combining reviews is also a live discussion that will be addressed.