| Summary: | This paper focuses on Sri Lanka’s First Review under the Extended Arrangement under the Extended Fund Facility, Requests for a Waiver of Nonobservance of Performance Criterion, Modification of Performance Criteria, Rephasing of Access, and Financing Assurances Review. Sri Lanka’s performance under the program was satisfactory. Macroeconomic policy reforms are starting to bear fruit and the economy is showing tentative signs of stabilization, with rapid disinflation, significant revenue-based fiscal adjustment, and reserves build-up. All but one-performance criteria and all but one indicative targets were met at end-June. Most structural benchmarks due by end-October 2023 were either met or implemented with delay. Notably, the authorities published the Governance Diagnostic Report, making Sri Lanka the first country in Asia to undergo the IMF Governance Diagnostic exercise. The authorities have made commendable progress toward restoring debt sustainability, raising revenue, rebuilding reserves buffers, reducing inflation, and safeguarding financial stability. Strong commitment to improving governance and protecting the poor and vulnerable remains critical
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