By The Pulseline News Desk
Sri Lanka must carefully weigh its options before signing up for another IMF loan programme, with a potential Stand-By Arrangement (SBA) risking a heavy repayment burden just as the country’s Eurobond obligations begin to rise, International Finance Corporation (IFC) Country Manager Gregory Smith has warned.
Speaking at an event organised by DFCC, Smith has said Sri Lanka’s current Extended Fund Facility (EFF) programme is due to end in March 2027, leaving the Government with limited time to decide how it will maintain an economic policy anchor after the programme expires.
His warning centres on the timing of repayments.
Under an SBA, Sri Lanka could receive additional balance-of-payments support, but repayments would begin during the same period in which the country faces increasing international bond obligations.
“All you’re doing is loading those years with huge repayments, and setting yourself up for another fall,” Smith has said.
He has said any decision to enter an SBA would therefore have to be accompanied by a clear strategy for liquidity and debt management.
Repayment wall approaching
The concern is illustrated by Sri Lanka’s projected IMF repayments.
According to IMF projections, Sri Lanka’s principal repayment obligation in 2028 is around SDR 160.15 million, equivalent to approximately US$ 219.5 million, while total payments including charges and interest are projected at about US$ 350.8 million.
That year also coincides with the maturity of a US$ 1.25 billion Eurobond in April 2028.
The pressure increases in subsequent years.
Total IMF obligations, including principal, interest and charges, are projected at around US$ 465 million in 2029 and US$ 555 million in 2030. Further significant repayments are expected in 2031 and 2032.
Smith has said the country needs to look beyond the immediate availability of IMF financing and consider when that money will have to be repaid.
“You’ve got to think of when you borrow the money, and when you’re going to pay it back,” he has said.
What comes after March 2027?
Smith has identified several options for Sri Lanka once the EFF ends, including an IMF Policy Coordination Instrument (PCI) or a credible homegrown reform programme endorsed by the IMF.
Unlike an SBA, a PCI does not provide financing but can serve as a policy anchor, helping maintain investor and market confidence.
A homegrown programme, meanwhile, could allow Sri Lanka to define its own reform priorities while securing IMF endorsement.
Smith has said he had yet to see a sufficiently detailed Government reform programme outlining what reforms it intends to pursue beyond the current IMF arrangement.
“What I haven’t seen is; ‘This is what we’re going to do, these are the reforms we are going to make’,” he has said.
But time is becoming a major constraint, he has cautioned, with less than six months remaining before the EFF’s March 2027 end date.
The SBA temptation
The SBA could nevertheless prove attractive because it is generally designed to provide relatively quick balance-of-payments support with less structural conditionality than an EFF.
Smith has noted that Sri Lanka successfully completed SBAs in 2001 and 2009, while its previous EFF programmes in 2003 and 2016 ultimately failed to achieve their objectives.
The distinction, he has said, is important.
The EFF comes with heavier conditionality and focuses on deeper structural reforms, while an SBA is generally shorter and less intrusive.
That difference could make an SBA politically easier — but Smith has warned that easier access to financing should not be confused with a solution to Sri Lanka’s underlying debt problem.
The real danger: refinancing the future
The concern is ultimately about debt timing.
Sri Lanka is rebuilding reserves and restoring market access after its 2022 economic crisis, but the country will soon move from a period of relatively limited repayments into years of significantly higher obligations.
Adding a new IMF loan during this period could provide short-term breathing space while simultaneously increasing future repayment commitments.
Smith has said Sri Lanka therefore needs to change the way it approaches borrowing.
“We’ve got to switch the way the country thinks of debt management, rather than just taking Eurobonds, taking big loans.”
The focus, he has argued, must shift from how much Sri Lanka can borrow today to whether it can comfortably repay that borrowing tomorrow.
With the EFF deadline approaching and the 2028 Eurobond maturity looming, the decision facing policymakers is no longer simply whether Sri Lanka needs another IMF programme.
It is which arrangement can preserve investor confidence without creating another repayment crisis a few years down the road.
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