Sri Lanka has made commendable progress in implementing difficult but much-needed reforms and these efforts are bearing fruit as the economy is showing tentative signs of stabilization, said the International Monetary Fund (IMF) on Wednesday.

An IMF mission team led by Peter Breuer and Katsiaryna Svirydzenka visited Colombo from Sept. 14 to 27 to discuss economic and financial policies to support the approval of the first review of the program under the Extended Fund Facility (EFF) arrangement.

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The statement issued after the discussion said inflation is down from a peak of 70 percent in September 2022 to below two percent in September 2023, with gross international reserves increasing by 1.5 billion U.S. dollars during March-June this year.

"Despite early signs of stabilization, full economic recovery is not yet assured. Growth momentum remains subdued, with real GDP in the second quarter contracting by 3.1 percent on a year-on-year basis and high-frequency economic indicators continuing to provide mixed signals. Reserve accumulation has slowed in recent months," the statement said.

Sri Lanka pay off $200 million loan from Bangladesh with $4.5 million interest

The statement said sustaining the reform momentum is critical to put the economy on a path towards lasting recovery and stable and inclusive economic growth, adding that the authorities have met the program's primary balance targets and remain committed to this important pillar of the program so as to support their efforts to restore debt sustainability.

Sri Lanka repays $100million in second installment of loan taken from Bangladesh