The Sri Lankan economy is expected to contract by three per cent in 2023 before registering a modest growth of 1.5 per cent in 2024, said Krishna Srinivasan, Director of Asia and Pacific Department, IMF.

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The IMF official said the country's economic prospects hinge quite critically on the implementation of the economic reform program it had agreed in particular for five key areas.

The five key areas were an ambitious revenue-based fiscal consolidation, restoration of public debt sustainability, a multi-pronged strategy to restore price stability and rebuild reserves, policies to safeguard financial sector stability, and structural reforms to address corruption vulnerabilities and enhance growth.

In March this year, the IMF Executive Board approved a 48-month extended arrangement under the Extended Fund Facility of USD 3 billion to support crisis-hit Sri Lanka's economic policies and reforms. Of the total USD 3 billion funds, the country was immediately promised an initial disbursement of about USD 330 million.

Sri Lanka has been facing a severe economic crisis as a result of past policy missteps and economic shocks.

Srinivasan is in Colombo, his first visit to Sri Lanka, to further strengthen the IMF's engagement with all stakeholders in the country. In addition to meeting with the President and top leadership of the country, he engaged with members of the opposition, civil society organizations, trade unions, think tanks, and other stakeholders.

"Sri Lanka, as you know, has been facing a severe crisis because of past policy missteps and back-to-back economic shocks. We have been deeply concerned about the impact of the crisis on the Sri Lankan people, particularly the poor and vulnerable groups, and about the economic costs of the delay in the country's access to external financing," Srinivasan said, referring to what challenging global environment mean for Sri Lanka.

The IMF official commended Sri Lanka for having already started implementing many of the challenging policy actions in those five key areas. It is now essential to continue the reform momentum under strong ownership by the authorities and the Sri Lankan people, more broadly, he added.

"Economic impact of the reforms on the poor and vulnerable needs to be mitigated with appropriate measures. In this regard, we welcome the authorities' firm commitment to strengthen social safety nets, including through a minimum spending floor, well-targeted spending through the new social registry, and establishment of objective eligibility criteria."