2026 Budget Must Reflect Fiscal Discipline, Says IMF

COLOMBO (News 1st); The International Monetary Fund (IMF) has called on the Sri Lankan government to maintain momentum on revenue mobilisation, fiscal discipline, and structural reforms as the country prepares its 2026 national budget.

The remarks were made by IMF Mission Chief Evan Papageorgiou, who underscored the importance of aligning budgetary plans with the parameters of the Extended Fund Facility (EFF) programme.

Papageorgiou stressed that the government must continue efforts to broaden the tax base, improve compliance, and strengthen the tax exemption of frameworks. He also reiterated the importance of cost-recovery electricity pricing and state-owned enterprise (SOE) governance reforms to contain fiscal risks.

He highlighted the need for effective public-private partnerships, transparent public procurement, and efficient public investment management to improve the investment climate.

The IMF also emphasized the importance of governance reforms to reduce corruption vulnerabilities, including safeguarding the independence of oversight institutions.

On the debt restructuring front, Papageorgiou urged authorities to ensure that the restructuring of SriLankan Airlines’ debt aligns with overall debt targets and to finalize remaining agreements with official creditors. He also called for the swift operationalization of the Public Debt Management Office (PDMO), describing it as a key step toward prudent debt management practices.

Regarding SOE reforms, Papageorgiou acknowledged the government’s commitment to restructuring and welcomed the development of a new SOE Act. He noted that SOEs in Sri Lanka carry systemic importance and risks due to their size and influence on the broader economy, including the labour market.

“We are heartened by the progress so far and remain in close communication with the government on shaping the new legislation,” he added.