Sri Lanka’s economy expanded 4.2% in the second quarter of 2026 despite an oil price shock and rising global risks, the International Monetary Fund said Wednesday.
It marked the 11th straight quarter of growth, a testament to the strength of an economy that is still recovering from a financial crisis in 2022. But the IMF said risks remain from the conflict in West Asia, uncertainty about global trade policy and climate-related shocks.
Headline inflation climbed to 8% on a year-on-year basis in August, mainly due to higher world oil prices, the IMF said. It warned that continued energy price pressures can weigh on household incomes, business costs and external balances.
The Fund said Sri Lanka’s economic reform programme had made it better able to absorb shocks but urged the government to continue with prudent policies and structural reforms.
The latest IMF assessment said Sri Lanka is continuing with its Extended Fund Facility programme. In May, the Fund had said the economy should stay resilient but growth would likely slow to 3% in 2026 due to the Middle East conflict and its impact on oil prices and tourism.
