According to a Daily Mirror article published on 29th April 2025, Sri Lanka is preparing to increase electricity tariffs by July 1 to meet key conditions set by the International Monetary Fund (IMF) for the release of its next loan tranche of US$344 million, part of the ongoing US$1.7 billion Extended Fund Facility arrangement. The IMF has expressed dissatisfaction with the government’s January 2024 decision to reduce electricity tariffs by 20%, stating that it deviated from the cost-recovery pricing model required under the agreement.
●The IMF objected to the government’s 20% electricity tariff cut in January 2024, citing a failure to uphold cost-recovery pricing.
●A staff-level agreement has been reached between the IMF and Sri Lankan authorities to conclude the Fourth Review of the Extended Fund Facility programme.
●Approval of the US$344 million tranche is contingent on IMF Executive Board approval.
●Two primary conditions for approval are:
○Restoration of cost-reflective electricity pricing and reactivation of the automatic pricing adjustment mechanism.
○Completion of a financing assurances review to confirm multilateral support and sufficient progress in debt restructuring.
The Ceylon Electricity Board (CEB) has confirmed it is in the process of calculating new tariffs based on the current energy mix—including hydropower, thermal, and solar—which will be submitted to the Public Utilities Commission of Sri Lanka for consideration.
Despite earlier promises to revise the IMF agreement, the government is continuing its implementation. Sri Lanka’s reform efforts are showing strong results, including a projected 5% economic growth in 2024, an increase in the revenue-to-GDP ratio from 8.2% in 2022 to 13.5% in 2024, and foreign reserves reaching US$6.5 billion by end-March 2025. The IMF also reports that Sri Lanka’s debt restructuring is nearing completion.
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