Description

The government has embarked on an expenditure-focused fiscal consolidation program in response to rising debt vulnerabilities following a sharp increase in public debt in FY25/26, aimed at placing public debt firmly on a downward path and strengthening external buffers. To support growth and address large development needs, the government plans to encourage private sector participation, helping offset the contractionary effects of fiscal adjustment. Unemployment remains elevated, at about 33.5 percent overall and 52.2 percent among youth. The sharp increase in public debt has heightened the challenge of balancing substantial development needs with macroeconomic sustainability, even as growth accelerated to 4.9 percent in 2025. Debt dynamics have become less favorable, with the effective interest rate exceeding nominal GDP growth. Inflation remained moderate through July 2026, partly supported by the Fuel Price Regulation Mechanism, funded by a fuel levy.

More publications in this series: IMF Staff Country Reports